Written by Felix Minderbinder
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Topics: Banks, Housing

Thursday, 25 August 2005

image for Con Artists Stealing Millions in Real Estate Scams
An unsellable Miami house repeatedly flipped in a real state scam

MIAMI (UPI)-Con artists are thriving in the lax American housing industry and are stealing hundreds of millions of dollars by duping banks and homeowners.

One star is Matt Moxie, who seemed to be the mortgage lender's best customer. The 26-year-old Miami resident knew how to qualify for loans. Moxie generated lots of business for lenders in Florida, Georgia, Mississippi, New Mexico, Texas and New York. As an apparent go-getter real estate investor, Moxie took out $567 million in mortgages to finance his apparently ever-growing group of houses.

But in reality, Moxie was every lender's worst nightmare. Federal law officials say that Moxie, a.k.a. Matt Mandrake, Matt Munchkin, and Matt Morkman, and many other aliases, masterminded a massive mortgage fraud that ensnared at least 110 different lenders, including Bank of America, Morgan Stanley, Citibank, the Federal Reserve, and dozens of others. Using over 40 false identities, Moxie forged deeds that persuaded banks that he had paid off loans and thereby owned homes that he was actually just renting.

Moxie thereby persuaded banks to lend him hundreds of millions of dollars from 2001 to early 2005, millions of dollars that subsequently vanished along with Moxie. The brazen fraud artist even left brokers with a copy of his novel "The Real Estate Scammer" which was a fictionalized account of his escapades.

He also established an Internet site with a home study course on real estate fraud, and appeared on numerous talk shows giving details of his deals. Moxie is now on the lam, living high on the hog thanks to his millions with have been cached throughout the world.

Moxie is just one of thousands of similar fraud artists freeloading on the housing boom, made lax by low interest rates, easy credit and inexperienced lending staff who never even meet their loan applicants.

The FBI report that the number of fraud incidents at federal banks has soared one hundred fold to 170,700 in 2004, and is set to exceed 450,000 cases this year. No one has exact figures on how much the fraud is costing banks and homeowners, but estimates say losses could be greater than $13 trillion a year.

Now that the property market is cooling off and crashing in most parts of the country, the banks are suddenly being overwhelmed by such mortgage scams.

Con artists like Moxie are highly sophisticated. They use identity theft, and have taken advantage of backlogs in overworked deed offices where ownership transfers now take months and leave lenders confused about who the true owners are.

Some scams use networks of buyers who repeatedly flip a property dozens of times at inflated prices among themselves before vanishing with the loan proceeds. In Atlanta, where a 35-person fraud ring that included even mortgage brokers and attorneys, flipped at least 10,000 houses in fifty neighborhoods stealing $2 billion in bank funds before fleeing the country.

The problem is getting worse for banks, since as real restate crashes, banks can't count on rising housing valuations to bail them out of bad loans, and as they securitize the mortgages and sell them to third parties, they are still on the hook for the loan if it goes bad.

In Arizona, Ohio, Florida, Oregon, Michigan, the Carolinas, the Dakotas, New York, Pennsylvania and California, state officials believe such blatant fraud has compelled lenders there to boost mortgage rates an extra two points to help cover their losses.

And when scams unravel, home values plummet. By the time the Arizona and Pennsylvania fraud rings were uncovered in 2004, property values had plunged from an average of $580,000 to $30,000, with most of the flipped houses remaining vacant, their windows broken or boarded up, their lawns covered in tall grass, weeds and refuse.

In most of the country where housing prices have skyrocketed there are many "equity stripping" frauds, where homeowners behind in their mortgage payments and facing foreclosure are preyed upon by scammers. Some home owners facing foreclosure who receive refinance help discover they've actually signed over their home to a scam artist and then face eviction.

To see the related story "San Diego Homes and Condos Now Impossible to Sell or Flip, Heralding US Real Estate Crash" click there.

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The story above is a satire or parody. It is entirely fictitious.

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