Police looking for help from victims of lawyers suspected in loan fraud
Police Chief John Romero has launched an investigation into mortgage broker scams, focusing on the involvement of local lawyers who he says took "under-the-table money" from home buyers who got duped into taking out loans they couldn't afford.
Police looking for help from victims of lawyers suspected in loan fraud
By Mark E. Vogler , Staff Writer
Eagle-Tribune
LAWRENCE - Police Chief John Romero has launched an investigation into mortgage broker scams, focusing on the involvement of local lawyers who he says took "under-the-table money" from home buyers who got duped into taking out loans they couldn't afford.
"We are looking into a situation brought to us by members of the legal profession, which involves a few unscrupulous lawyers who were just out to make a quick buck," Romero said of the open-ended, exploratory probe.
Romero wouldn't elaborate on complaints received by the police that prompted him to assign detectives of the city's auto-insurance-fraud task force to check several cases involving local lawyers. No criminal charges have been filed.
The chief said he decided to make the investigation public at this time because he believes the fraud is more prevalent and hopes victims of suspected mortgage fraud schemes will come forward.
"For us to get involved, it's got to be criminal - cases where kickbacks were made to the broker and the lawyer upfront," Romero said. "We really don't know the extent of the problem. But based on what we're hearing, we believe it certainly warrants looking into. That's why we want to get the word out."
The "kickbacks" Romero was referring to were checks totaling up to $20,000 written by the lender to the home buyer, which were immediately cashed and turned over to the broker and lawyer involved in the suspected scam. Those brokers and lawyers, police say, charged the fee to assist loan applicants with fudging financial information, like monthly income and expenses, so poor people could qualify for home loans.
"These unscrupulous lawyers and mortgage brokers are finding people who in some cases are desperate to get a loan," said police Detective Michael Simard. "They switch them to a high-interest, hard-money loan. They claim it's only going to be for a short time, and it's not going to cost them a lot of money, when in reality, it does. When the loan is applied for through the lender, the mortgage broker and lawyer will overstate the needed amount. That's where their cash profit comes in."
It's unreported income that the lawyer and mortgage broker charge the home buyer as a part of doing business. Oftentimes, several checks were written out for amounts under $10,000 to avoid scrutiny, Romero said.
"In one case we know of, the mortgage broker went to the bank with the client after the closing, watched him cash the check, then went back to the lawyer's office to get his cut with the lawyer," Simard said. "There was no paper trail, no document that proved that the lawyer or mortgage broker got cash. But we know they did through the victim's statement."
Constance Vecchione of the Office of Bar Counsel - an independent body that works with the state Supreme Judicial Court in prosecuting lawyers - says she isn't aware of the ongoing police investigation or familiar with the kind of mortgage scam that detectives are checking.
"Any dishonesty by an attorney, whether in the course of their practice or privately, would be of concern to us," Vecchione said. "Most of these kinds of cases arise out of criminal convictions, and we get them out of the back end of a criminal conviction."
Boston lawyer David L. Yas, publisher and editor-in-chief of Massachusetts Lawyers Weekly, said he wasn't familiar with the fraud scenario described by police. But, he said, it struck him as serious misconduct for lawyers to be involved in.
"Something that can only be described as a cash kickback is certainly severe and would raise eyebrows. You hear whispers about things like this, but it's a very hard thing to prove," Yas said. "For a lawyer to be collecting a kickback like this, it boggles the mind to think that's happening. As long as there is a nefarious sect of the bar of lawyers - which is a very small minority - there will be practices like this."
Yas noted there are strict rules about the way lawyers can collect fees and believes the scenario outlined by Simard may violate several ethical rules affecting lawyers.
"Lawyers get busted over handling money more than anything else. It ranges from the more innocent sloppy mistake to something like this that's calculated," Yas said. "Most attorneys would be scared to death to think of doing something like this. Lawyers don't receive money unless they're handling it as a retainer and it's properly accounted for. Almost anything dealing with cash payments like this would raise a red flag."
Arlington real estate attorney Sami Baghdady, who is president of The Real Estate Bar Association for Massachusetts, called the scenario outlined by police "outrageous" and "very shameful."
"This kind of conduct appears to be criminal and it's certainly unethical - something that we at the bar association would condemn," said Baghdady, whose organization numbers 3,000 members. "Such people deserve to be behind bars. It's good that they're doing this investigation."
Lawrence police are taking a deep interest in the fraudulent aspects of predatory lending because of the spike in foreclosures over the past year.
"With all of the foreclosures going on in Lawrence right now, we're concerned about the potential for arson," police Capt. Michael Driscoll said. "A lot of the arson in the '90s was attributed to people who could no longer afford their properties and were looking for a way out. We don't want to return to that kind of situation."
BOX: To Report Fraud
People who believe they are victims of an attorney in a mortgage fraud scam can call Lawrence police at 978-794-5900, ext. 669.
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