One of the many things I do a lot lately is talk. I am the floor show for many bar meetings. I recently did two of these with a very nice lawyer from the U.S. Attorney’s Office, David Huang. They were both about mortgage fraud and how easily some lawyers got ensnared in a federal criminal prosecution.
Many really bad folks found ways to scam lots of money in real estate in the last decade, especially when property values were rocketing up weekly and banks were giving mortgages away with little or no due diligence. Most of the latest round involved inflating sales prices in order to mortgage more than the real price the property was being sold for. Sometimes the numbers were made to balance by using phony deposits. Other times, bogus “seller’s concessions” or equally dubious “repair credits” found their way to the HUD-1 form. Incredibly, there were instances when multiple HUD-1 forms were prepared for the same closing—one for the bank and one showing the real deal. The difference was that on the latter recap, cash moved to and not from the buyer.
