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Health & Fitness

"Fraud Cases Running Rampant"

I’m sure all of us are sick and tired of reading about these cases. There sure have been a lot of them in the states I do mortgages. I wish I understood what makes people think they won’t get caught. Is it that people that are desperate will do desperate things? Is it about the thrill? Is it about the money? 

I was involved in a fraud case in the late 80’s, even though I was one of the victims, it was a freighting experience. I will give you the reader’s digest version of this case. 

During that era, many banks were in trouble. Many had a lot of money out on development project that were in trouble. A bank President from a small institution that I was very friendly with called me, asking if I was interested in taking over a project. There were 4 completed houses and 8 building lots. The developer walked from the project and the bank was about to take title. There was 1.2 million dollars owed. The problem for the bank, if they took the property into inventory, they would be below the required reserves, which meant they would be taken over by FDIC.   

After seeing the properties, I determined that the maximum that I could pay for the project was $800,000. Based on these numbers, the bank would have a real problem and fail. The President came back to me, asking if it would be possible for me to trade their assets for mortgage receivables. I told him, the only way I can see a way for both of us to make it work, was for me to buy a package of 2nd mortgages that I could buy at a large discount.

During that time period there were large numbers of these mortgages available, the key was to find them in one package and in the same area. I went to work to find a large enough package to make it work and finally found a 1.1 million package in NH. There was a developer that took back second mortgages in order to sell his houses and condominiums. 

I contacted the President to put together a team, including credit people to investigate all the mortgages and decide which were worth buying. 4 people spent 5 days and it was decided that $790,000 fit the criteria that was set up. I negotiated the $790,000 worth of mortgages for $325,000 and they were conveyed to the bank. I now had a credit of $465,000, which I used to buy the banks project for the 1.2 million. I paid then difference of $735,000 and took over the 4 houses and 8 building lots. It was all good for 3 months.

After 3 months all the homeowners stopped paying. How was that possible? It turns out, all the mortgages were bogus. To give the developer time enough to flee the country, he made the payments. What a mess. Too make a long story short, the developer, two attorneys, 2 loan officers all went to prison. The FBI and attorney general offices from NH and MA questioned me, not fun, questioned the bank President, he told me, that was pretty scary. It didn’t take them long to figure out we were victims and not part of this fraud case. 

I have seen a serious fraud case first hand, as a victim it is freighting and has made me extremely mindful of doing things the right way. The ones that commit these crimes, should do some serious time, so that others will think twice before doing the crime. 

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