Mysteriously High Price on Grand Avenue
Here’s a stumper right in our own back yard. According to Property Shark, the brownstoner at 354 Grand Avenue sold in December for a whopping $1.9 million. Even if this were one of the larger-scale brownstones on the next block this price would seem quite high. But this is a 13-footer across from a row…
Here’s a stumper right in our own back yard. According to Property Shark, the brownstoner at 354 Grand Avenue sold in December for a whopping $1.9 million. Even if this were one of the larger-scale brownstones on the next block this price would seem quite high. But this is a 13-footer across from a row of newish row houses lacking the charm that the neighborhood is known for. If accurate, there must be some development twist to the purchase. As far as we can tell though, the property is not contiguous with any larger lots or buildings. It also falls just outside the Clinton Hill Historic District line. Any theories?
GMAP P*Shark
Here is just one example of the kinds of mortgage frauds that have been perpetuated in Brownstone Brooklyn recently. Errol Lewis in the Daily news also reported on on a similar ring that usually ended the story by burning down the house and running off with the insurance money, leaving the bank and the neighborhood with a burnt out shell. That is what happened to the beautiful 4 story brownstone across the street from me, exactly one year ago.
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New York AG Spitzer files suit against alleged mortgage fraud ring
Posted on Wednesday, November 29, 2006 at 03:24PM by The Editor – Ian Shuter in Broker, Appraiser and/or False Appraisal(s), Closing Agent/Attorney, Court Cases, Flipping, New York | Comments Off | Print
In the following press release New York State Attorney General Eliot Spitzer today (November 29, 2006) announced that he has filed a lawsuit alleging that a group of real estate sellers, mortgage brokers, attorneys, and appraisers pursued a fraudulent real estate flipping scheme targeting minority neighborhoods in Brooklyn. In addition, the Attorney General announced that he has entered into consent decrees with some of the defendants that will provide substantial monetary relief to victims and stringent oversight of future real estate activities by the settling defendants.
According to the lawsuit, defendants Isaac Katz and Yoel Silberstein devised a scheme in which they purchased distressed properties in the Brooklyn neighborhoods of Crown Heights, Bedford-Stuyvesant, East Flatbush, East New York and Bushwick, and then enlisted the services of a front-man, mortgage brokers, and real estate lawyers to dupe purchasers and lending institutions in order to obtain significant resale profits.
The lawsuit alleges that defendant Amenophis Alleyne found prospective minority buyers with excellent credit to purchase the properties. The minority buyers, many of whom were Alleyne’s family and friends, allegedly were told that the properties were “investment opportunities†that could be purchased with no money down. They were also assured that rental income they would receive from prospective tenants would more than cover any mortgage payments.
According to the complaint, the mortgage brokers, defendants Theodore Welz and Shaya Saks, induced banks into issuing loans for the properties by preparing loan applications that misrepresented the borrowers’ income and assets and falsely stated that the borrowers were making significant down payments. According to the lawsuit, the banks were also provided with false appraisals, prepared by real estate appraisers including defendants Jeffery Richardson and Erik Johnson, that significantly inflated the values of the properties.
Defendants Benzion Frankel, Rephoel Weitzner, Devon Clarke, and Joseph Treff, the real estate attorneys who represented the lenders, the buyers and the sellers at the closings, prepared loan documents and public filings (including deeds and real estate transfer tax records) that allegedly misrepresented the actual sales prices of the properties.
Companies mentioned in the complaint as owned or controlled by some of the defendants are:
Johnson and Rose Appraisal Services
440 Cleveland Realty
865 Belmont Realty Corporation
According to the lawsuit, defendants Katz and Silberstein reaped substantial profits from their fraudulent scheme, which was carried out dozens of times between 2002 and early this year. In one case identified in the suit, they purchased a property for $205,000 and sold it later the same day for $370,000. The buyers, the lawsuit alleges, were unaware that their “no money down†deals were being accomplished only by hiding the true nature of the transactions from their lenders. As a result, many buyers were saddled with large, high-interest-rate mortgages they could not afford. Some allegedly ended up in default and foreclosure, ruining their once-excellent credit. The lawsuit further alleges that the scheme artificially inflated market prices of homes in the affected neighborhoods as appraisers, sellers, real estate brokers and others seeking to value properties in those areas relied on the false sales prices reported in deeds and other public records.
“The perpetrators of this scam promised minority home buyers an opportunity to climb the economic ladder,†Spitzer said. “In reality, the defendants profited handsomely while their victims saw their financial security impaired or even ruined. By imposing significant monetary penalties on the participants in the scheme, we hope to send the message that fraudulent and discriminatory real estate deals will not be tolerated in the State of New York.â€
The Attorney General has entered into consent decrees resolving the lawsuit against defendants Katz, Silberstein, Welz and Saks. The decrees require:
• payment of nearly $1.8 million in restitution and penalties
• a detailed accounting of the real estate transactions conducted by the mortgage fraud ring
• extensive monitoring of future real estate activities by defendants Katz and Silberstein
• significant restrictions on mortgage brokering activities by defendants Welz and Saks.
The funds remitted pursuant to the decrees will be used to compensate victims of the scheme who file complaints with the Attorney General. Any remaining funds will be retained by the State as penalties.
The lawsuit will proceed against defendant Alleyne as well as defendants Clarke, the lawyer for the buyers at the closings; Frankel and Weitzner, lawyers for the defrauded banks; Treff, the lawyer for defendants Katz and Silberstein; and Richardson and Johnson, the appraisers.
This case is being handled by Assistant Attorneys General Brian J. Kreiswirth, Beth S. Frank, and Brian J. Schmidt under the supervision of Natalie R. Williams, Chief of the Civil Rights Bureau
Even “nice inside” doesn’t warrant that kind of price for a property in that location. It’s probably close to $1MM over what it’s really worth.
Anon @ 2:37 described it perfectly. That’s what has been happening. A couple brokers in Brooklyn were recently arrested. SEC went after them. And a similiar situation in Albany.
maybe it’s really nice inside
ha ha
Two-family at 356 Grand sold for $720,000 in october, same size. Around the block at 83 Downing,a 20′ wide two-family sold for $1,175,000 in October.
Thanks Anon 2.37, that is a clearer description of a potential fraud scenario. Hmmm.
Thanks Anon 2.37, that is a clearer description of a potential fraud scenario. Hmmm.
Wow, this does sound like a fraud. A seller has a buyer he knows buy his place for a wildly inflated price that the buyer gets a gigantic mortgage for. The seller gets the entire 1.9 million in cash for the property. The buyer defaults on mortgage. Bank now owns property worth many hundreds of thousands (if not a million) dollars less than the mortgage.
Of course, the seller has to reimburse the buyer for the $200,000 or so downpayment, but since the seller probably originally gave the buyer that money in the first place (if not more for his trouble), it’s not a problem.
Who appraised this house at way beyond market value in the first place? If indeed other houses are selling for significantly less in the area (are they)?
If borrowed 90% on 1st mortgage – if lender allowed it – you would be paying a MortgageInsurancePremium -about another .5% often until you reached 80% equity.
By taking out a smaller HELOC avoiding that mortgage ins. premium.
It isn’t the two mortgages that is fishy. It is the 1.9 million sale price, and the fact that they were able to get over 1.7 million in financing for this property. No competent/ethical appraiser would come in anywhere near this purchase price.