Mortgage Misery - Part 2: Talking to a scam victim

By: Sarah Platt Email
By: Sarah Platt Email

Owning a home is a dream and goal that many Americans have proudly achieved. However, in recent months, the mortgage crisis has turned that dream into a nightmare for many. A record number of homes are facing foreclosure. Some mortgage fraud schemes have lent a hand to these tough times.

Real estate experts tell us mortgage troubles have hit every socio-economic group, whether a home is worth $50,000 or $500,000. While some homeowners have simply over-extended themselves, the FBI says lending fraud is a contributing factor in the mortgage crisis, and often times people don't realize they're in trouble until it's too late. That's what happened to one Michiana man, who shared his story with Newscenter 16.

"As I began to accumulate some different properties, I started really beginning to suspect that something was wrong." We'll call this man "John." He asked us not to use his real name and to disguise his voice. A few years ago, John bought several homes as investment properties, but after a couple of years realized something wasn't quite right. "Altogether, I bought nine properties. There was a couple things that I thought were wrong. One was that it seemed like the same appraiser was doing all the appraisals," adds John.

After taking a closer look at the numbers, John learned that he bought his homes at prices inflated by tens of thousands of dollars. At the time, he believed the price was fair because it checked out with the home's appraiser, realtor, and mortgage broker. But John claims they were working together to set the home at a specific price, for their profit.

"They can determine between the three of them what the price of a property is going to be. It's pretty hard to dispute that because you have three experts and you don't realize that they're working together, but they are," explains John.

To confirm his suspicions, John went to Century 21 realtors and had them do a comparative market analysis on his homes. With a look at the numbers, you'll see a drastic difference between Century 21's sales price appraisal and the original appraisal that John received.

Here's a look at a few: The original appraiser assessed his home at 1201 Elmer in South Bend for $63,000. Century 21's analysis came up with a value of only $17,000. That's a $46,000 difference.

Another home at 618 Johnson was appraised at $62,000. Century 21's appraisal was just $8,000. That's a $54,000 difference.

Here's a comparison of a third home, located at 809 Harrison, again in South Bend. The original appraisal assessed the value at $69,000. Century 21 found the value to be just $8,700. That's a difference of more than $60,000.

"His appraisals definitely are inaccurate and there's no way that I would have known that at the time," explains John. "They had told the appraiser what the property was going to sell for and then his job was to make the appraisal come out to that dollar amount."

John has been able to short sell two of his properties back to the mortgage company, but the other seven homes are going into foreclosure. "It's been pretty difficult. It's definitely affected my job. It's been difficult on my family, on my marriage. It's affecting my credit, and up until this time, I never had a difficulty with credit," adds John.

At John's request, we showed his information to the FBI. "There's a lot of players in the process; appraisals are a key part of it," explains U.S. Attorney David Capp.

U.S. Attorney David Capp (left)
Tom Gancarz (right)

The FBI has been inundated with so many complaints of predatory lending and mortgage schemes that they've created a task force to address the problem. It's something people like John hope will make a difference. "There just needs to be a stop put to it. I'm sure South Bend isn't alone," he says.

Just this week, the U.S. Attorney's office said William DePalma of South Bend has agreed to plead guilty to mortgage fraud. Officials say more charges will be filed in the coming weeks. John says he hopes his story is a lesson to others to know who you're dealing with, and to do your research before signing on any dotted lines.

In some cases, loans like John's are referred to as "hot potatoes," when banks try to unload high-risk loans by passing them on and re-selling them to the next institution. In the end, whoever gets stuck with the risky loan loses out. In the case of a couple of John's homes, he says his mortgage was sold at least two or three more times.

To read the other parts of this series, visit the following stories:
Mortgage Misery - Part 1: How scams happen
Mortgage Misery - Part 3: A local Realtor's perspective

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