George Levie addressed the Business Law Section of the Florida Bar with the following presentation:
DEFENDING MORTGAGE FRAUD DEFENDANTS
To help in the defense of mortgage fraud charges, there needs to be a thorough understanding of the loan documents that are the subject of the allegations. Therefore, each subject mortgage loan file must be analyzed.
The various documents that will appear in the loan file include the mortgage application or Form 1003. This should be an attestation of the borrower’s assets and liabilities, the borrower’s income, a description of the property to be purchased or refinanced and the signature of the borrower. The expert needs to determine what supporting documents actually exist in the files. Questions such as “Did the borrower actually sign the Form 1003?” or “Did the loan officer prepare it and sign for the borrower?” need to be asked and answered.
There should be federal income tax returns in the file if it was a fully documented loan. Confirm that the borrower signed IRS Form 4506 agreeing to the release of signed filed copies of tax returns and transcripts from the IRS. This is to validate the tax returns submitted.
Check to see if the property is in the borrower’s name or does the loan file reveal the existence of a straw buyer. A straw buyer is a person whose profile is used to serve as a cover for a transaction. Straw buyers can be willing participants in the scheme who are paid for providing their names and credit information to make a false purchase. Straw buyers can also be victims whose identity is being used without their permission (such as in ID theft).
Answer the following questions:
• Does the loan file contain a credit report?
• Is the credit report in the name of the borrower or of a straw buyer?
• Do the social security number reconcile with the various documents?
• Is the FICO score high for the borrower’s income and debt?
• Was there an appraisal in the file?
• Was the appraiser credentialed and associated with a large organization?
• Do the names and addresses on the appraisal agree with the loan documents?
• How recent is the appraisal?
• Are values increasing or decreasing in the area?
• Are the comparables real?
In defense of the defendants, it is vitally important to understand the loan file, its contents and what each document means. Just as important is to know who prepared each of the documents within the mortgage fraud organization. The expert for the defense will need to know the role of mortgage defendants and what part they played in each of the loan documents, as well as what happened to the loan after it was funded. The propriety of the mortgage loan documents must be known in order to assist the defense. As there are voluminous documents associated with each mortgage loan file, the validity and accuracy of each document must be determined. The defense cannot just accept a plaintiff’s submission of documents in loan files.