Monday, June 14, 2010


The words “Ponzi scheme” can be found quite easily throughout the world of media these days. What exactly is a Ponzi scheme though? It’s something to be forewarned about so that you don’t fall into its deadly trap.


First things first, according to the American Bar Association, a Ponzi scheme is:

“…a type of securities fraud where the promoter makes some sort of false or misleading statement about an investment (often including a guaranteed high rate of return) and pays off older investors with newer investor’s monies. Eventually, when the promoter can’t find any new investors, the scheme collapses.”

The difference between a Ponzi scheme and a pyramid scheme is that a Ponzi scheme the promoter handles the new recruits and the new money. Within a pyramid scheme, people within the scam recruit new participants. In both of these traps, the early investors receive an income from the subsequent individuals taking part in the scam; however, only in a Ponzi scheme does the organizer handle all of the recruitment.


Charles Ponzi came to the United States at the turn of the century from Italy. He was an Italian swindler that went by many different aliases to con his prey and had been jailed many times. In 1918, he began offering his investors a choice between receiving a fifty percent return on a simple forty-five day investment and receiving one hundred percent return on a ninety day investment. Ponzi promoted that this was a possibility due to a special circumstance with the international postal reply coupon system. Back then, due to an international agreement, postal reply coupons were accepted by all countries despite the fact there were varying cost from country to country (depending on their economy).

As legal as Ponzi’s idea was (the cost for an IPRC in the US could have been a dime while a nickel in Germany), he full well knew that his idea would not be a success. It was impossible due to importation restrictions. The idea was too tempting though and Ponzi pushed it well.

Unfortunately for Ponzi, suspicions grew when investors would not receive the interest on their investments. The scheme had no underlying business so it couldn’t possibly generate any revenue! In 1920, Ponzi’s brilliant idea came crashing around when investors began requesting their money be returned during a growing governmental inquest into his company.

Friday, June 11, 2010

MORTGAGE FRAUD UNFORTUNATE GROWTH INDUSTRY –Statistics, FERA, Adding Mortgage Fraud to Your Practice and Mortgage Fraud Types - Part 5


The word "fraud" traces its origin from Latin to a Sanskrit word that means, "He bends injures." The Black Law dictionary defines fraud as “the intentional perversion of truth for the purpose of inducting another in reliance upon it to part with some valuable thing belonging to him or surrendering a legal right.”

Mortgage fraud can be committed by:

1. Application Fraud is the intentional misrepresentation of an applicant's income, assets, liabilities, credit history, credit scores or job information.

2. Real Estate Value Fraud is the intentional misrepresentation of the real property value by a real estate appraiser or other professional.

3. Real Estate Title Fraud is the intentional misrepresentation of the liens, judgments, lis pendens, survey problems or other "clouds on the title" by a title company.

4. Transaction Fraud is the participation in a real estate scheme to obtain a loan though misrepresentation of facts.

There are two types of fraud:

1. Fraud for Housing

2. Fraud for Profit

Freddie Mac and Fannie Mae do not distinguish between Fraud for Housing and Fraud for Profit.

Frauds for Housing - The borrower and/or other parties in a real estate transaction can misrepresent facts to a lender to help a borrower obtain a loan and, therefore, a home. Other parties to the transaction include real estate brokers, mortgage brokers, appraisers, title companies, closing agents, lenders' account representatives, accountants, etc.

It is still fraud, no matter how admirable the idea sounds that a "professional" is helping a customer obtain a loan and hence a home. The lender should have the right to all the facts and they should make the decision whether or not to loan to the applicant. "This is not a noble cause, this hurts our reputation," states Jack Nunnery, Chase Manhattan's National Customer Risk Manager. Obviously, un-professionals profit from this fraud.

Fraud for Profit - An investor deceives a lender into making a loan so that the investor makes a profit. The investor may or may not have the help of other parties in the transaction. Investor fraud includes the following schemes:

1. A Straw Buyer
2. Land Flips
3. Equity Skim

A Straw Buyer is a person used to buy property to conceal the actual owner. The Straw Buyer’s income and credit is used to fraudulently obtain the loan. The Straw Buyer, the actual property owner and anyone else involved in the scheme are guilty of fraud. Straw Buyers are sometimes used in the following occasions:

• Investors who want the more favorable interest rate, loan-to-value and other terms available on owner occupied property
• Builders who want to obtain working capital
• Sellers who want to illegally get money from their property
• Borrowers who could not obtain a mortgage on the subject property

A Land Flip is when real property is bought at or below market price and is resold at a price higher than market value. The higher sales price is used to obtain an illegal higher mortgage loan amount. The cooperation of at least a dishonest real estate appraiser is necessary.

An Equity Skim example is as follows: The real property owner obtains a high loan-to-value mortgage on tenant occupied property. The owner collects rent from the tenant(s), but does not pay the mortgage. The owner skims equity from the property during the prolonged collections and foreclosure proceedings.

Fraud can be committed by misrepresentations on the following types of documents:

• Application Documents
• Appraisal Documents
• Credit Reporting Documents
• Income Documents
• Asset Documents

The red flags in these documents are numerous. The most prevalent fraud is income documentation.

Unfortunately, the computer has been a "double-edge" sword in the mortgage industry. On one side, it has provided technology to speed up and automate mortgage processes. On the dark side, with scanners, laser printers and graphic programs, high quality fraudulent documents have been easier to create.


This is not the conclusion but the beginning of a five to seven year window of unfortunate opportunity for the criminal defense attorney to provide capable legal services to white-collar defendants along with expert litigation support from forensic mortgage fraud accountants. Take the time to explore the idea of adding mortgage fraud to your practice.

Gary Opper is the managing member of Levie-Opper, LLC, a mortgage fraud litigation support firm. He has a CPA and a CFP license. Opper is past President of the FAMB - Miami Chapter and the FICPA - Gold Coast Chapter. Opper is a member of the NAMB, FAMB, AICPA and the FICPA. Mr. Opper has been the NAMB’s Writer of the Year and Featured Writer of the Year. Mr. Opper was the FAMB’s Broker of the Year. He has been president of mortgage lender since 1984. Mr. Opper is available to speak to your group. Please contact him to arrange a speech for your event. He may be reached at (954) 384-4557, fax: (954) 384-5483, or e mail:

© Gary Opper. All Rights Reserved.

Wednesday, June 9, 2010

MORTGAGE FRAUD UNFORTUNATE GROWTH INDUSTRY –Statistics, FERA, Adding Mortgage Fraud to Your Practice and Mortgage Fraud Types - Part 4


Now is the right time to add mortgage fraud to your law practice. It has become the “hot topic.” It is usually the lead article of magazines and newspapers. With the growing cases of fraud, the government is seriously and aggressively pursuing guilty parties. A vast amount of money is being provided to the FBI, the Attorney General, the Department of Justice and other governmental agencies are working towards tracking down fraud and punishing the guilty parties. Because of the rampant outbreaks of mortgage fraud, it is a productive, worthwhile and rewarding area of exploration.

According to noted criminal defense attorney Brian H. Bieber, “The mortgage fraud industry has exploded to depths no one could fathom. On the state and federal levels, prosecutors are scrambling to find sufficient resources to arrest indict and convict individuals. The targets are not just mortgagees, but are mortgage companies, low, mid and high level executives. Many cases; however, are defensible. Experienced criminal defense lawyers know which questions to ask, which documents to look at and they can assist in pinpointing where the fraud began and who is responsible under the law.” Forensic mortgage fraud accounting can assist lawyers to determine the proper questions and documents.

Fraud cases can be both criminal and civil. Civil cases can involve lenders suing mortgage un-professionals, appraisers, title companies and private mortgage insurance companies.

Monday, June 7, 2010

MORTGAGE FRAUD UNFORTUNATE GROWTH INDUSTRY –Statistics, FERA, Adding Mortgage Fraud to Your Practice and Mortgage Fraud Types - Part 3


Fraud is a significant cause behind the U.S. subprime mortgage collapse and the international economic downturn. It is for this reason that the Fraud Enforcement and Recovery Act of 2009 (FERA) was created. FERA was designed to improve enforcing the mortgage fraud statutes. It will also assist in the recovery of funds that were lost during these fraudulent incidents and other related reasons.

FERA also offers the government additional tools needed in order to crack down on the occurrences of fraud that, unfortunately, have put numerous families at risk for losing their homes. Additionally, FERA expands the abilities of the Department of Justice to prosecute individuals and/or corporations responsible for predatory lending. Furthermore, through the passing of FERA, a bipartisan Financial Crisis Inquiry Commission has been established in order to explore the financial practices that have created our current economic crisis.

Under the Act, the following amounts have been allocated to combat mortgage fraud:

Fiscal Year 2010 2011 Total
(in millions of dollars)

FBI $75 $65 $140
US Attorney Offices $50 $50 $100
DOJ- Criminal Division $20 $20 $40
DOJ- Civil Division $15 $15 $30
DOJ - Tax Division $5 $5 $10
Postal Inspection Service $30 $30 $60
HUD Inspector General $30 $30 $60
Secret Service $20 $20 $40
SEC $21 $21 $42

Totals $266 $256 $522

The United States 2010 fiscal year begins October 1, 2009.

According to the U.S. Attorney’s office, they are attempting to fast track cases. In a case where the mortgage fraud is in the high millions, they may decide just to prove one to five million dollars of fraud and get a conviction with prison time instead of spending two years investigating to the get the maximum penalty.

Thursday, June 3, 2010

MORTGAGE FRAUD UNFORTUNATE GROWTH INDUSTRY –Statistics, FERA, Adding Mortgage Fraud to Your Practice and Mortgage Fraud Types - Part 2

According to acting U.S. Attorney Nora D. Dannehy, most mortgage fraud cases involve false representations on mortgage loan applications and inflated property appraisals. In fact, appraisal and mortgage fraud cause an estimated 83% of all mortgages to be legally problematic.

Bank America, Wells Fargo & Co., JP Morgan Chase & Co. and Citigroup Inc – some of the biggest players in the servicing industry – are all facing litigation.

In mid-July, the Federal Trade Commission and the California Attorney General’s Office – in conjunction with the state Real Estate Department and other agencies – jointly announced lawsuits, injunctions and fines against 189 companies across the nation, claiming they deceived troubled homeowners through mortgage modification and foreclosure schemes.

While Taylor, Bean & Whitaker Mortgage Corp. (TB&W), headquartered in Ocala, Florida was attempting to give a capital infusion to Colonial Bank of $300 million, federal and state officials raided both entities. TB&W’s website states they are “… a top 10 national wholesale mortgage lender.” The Wall Street Journal says they are the third-largest underwriter of FHA loans. Colonial Bank is the sixth largest bank in Florida. There relationship was incestuous. TB&W was trying to give Colonial Bank a $300 million capital infusion at the same time that Colonial Bank was a major funder of TB&W.

Los Angeles County Department of Consumer Affairs director Pastor Herrera, Jr. noted that fraudulent foreclosure prevention services were so bad and rampant that the category could top the list of consumer complaints for 2009.

Governor Pat Quinn of Illinois recently signed a mortgage scam defense bill that offers better consumer protection to those who are in search of home loans.

According to the Mortgage Asset Research Institute, the states with the most significant mortgage fraud problems in 2008 were Rhode Island, Florida, Illinois, Georgia, Maryland, New York, Michigan, California, Missouri and Colorado (in that order). Florida is the mortgage fraud’s epicenter and hypocenter. According to my conversations with anonymous sources at the U. S. Attorney’s office, Rhode Island’s position as first is an anomaly. Unfortunately, Florida is dubiously first.

Mortgage fraud may be pandemic and not just epidemic. It is pervasive in our society. As previously stated, Congress has devoted $522 million to prosecute mortgage fraud. The city, state and federal governments have devoted tremendous resources to fight mortgage fraud. It has brought down top companies and banks in America. It has changed the way that people act and think for the next generation.