April 26, 2006 – Eight people, including two lawyers, have been indicted in a residential mortgage-fraud scheme that netted them tens of millions of dollars, state Attorney General Eliot Spitzer said yesterday. Spitzer said the defendants used dozens of straw buyers – people who claimed to be buying property and offered false job, income and other information to get mortgages – in hundreds of bank transactions worth a total of more than $200 million. The defendants would inflate the cost of a property they wanted to buy by $100,000 or more, Spitzer said. They would then give the lending bank real estate appraisals that misrepresented the physical condition and the market value of the property and the identities of the people who prepared the reports, he said. To illustrate the scheme, Spitzer cited a $310,000 house purchase in January 2004 for which the defendants obtained a $450,000 mortgage. He said they paid the owner the $310,000, paid off another $20,000, some of it to the straw buyer, and pocketed $120,000. When they defaulted on the mortgage, the bank suffered the loss, he said. Spitzer said the defrauded banks included small, large, local and national institutions. “Virtually all of the major names are involved at one point or another,” he said.
$200M House Louses [NY Post]
Update from Spitzer [Brownstoner]