Investigators Tackle Two Common Mortgage Fraud Schemes

Posted by  on May 21, 2009

"Purchase an investment property for only $5,000 and enjoy royalty payments while a management company pays the mortgage." "Sign your pre-foreclosure home over to our company and pay lower monthly payments while we modify your home loan." While these pitches may sound professional and profitable, investigators say that con artists these lines to lure victims in recent mortgage fraud cases. Government agencies intend to spend more than a half billion dollars to uncover phony home loan operations like these:

"The Straw Buyer." Minnesota mortgage regulators fined Michael Prieskorn $2.2 million for processing over 200 allegedly fraudulent home loans. Officials claim that Prieskorn's company encouraged investors to use personal mortgage programs to buy investment property. Although Prieskorn claimed that his company would make mortgage payments while waiting to flip the properties for sale, the money dried up. Prieskorn has gone into hiding, while investors are on the hook for millions of dollars in unpaid home loans.

"Dream Home Payoff." A federal grand jury recently indicted the officers of a company that promised to pay off investors' mortgages in exchange for access to their home equity. The alleged criminals signed up distressed homeowners for overpriced refinance deals, suggesting that their cashed-out equity would fund investments in high-return technology companies. Returns from those investments, agents promised, would cover higher monthly mortgage payments. When those returns failed to materialize, mortgage lenders foreclosed on victims' homes.

During the booming real estate market of the past decade, many underwriters processed home loans so quickly that fraudulent deals often flew under the radar. With mortgage lenders weeding out risky loans from their portfolios, more phony deals and fake companies have come to light than ever before. FTC and FBI representatives caution Americans to follow gut instincts when refinancing, especially when a company pledges to make mortgage payments on a homeowners behalf. If a deal is too good to be true, investigators warn, it probably is.


Get Mortgage Rates by Email

  • Compare mortgage rates offline
  • Get updated rates in your inbox
  • Apply for a mortgage from your email
  • We don't spam

Get Your Rates Emailed Now!

Subscribe To Lending Lowdown
Your information will never be shared
Shoprate User Survey