NBC NEWS
By Tom Costello
Correspondent
Oct. 21, 2005
WASHINGTON - In Detroit this week, the FBI arrested 20 people and charged them with bilking financial institutions out of $10 million.

It was a mortgage fraud scheme that the FBI says has become all too common with the country’s explosion in home values — and it’s not just the banks that are getting taken.

Four years ago, Richard Bird thought he was making a real estate investment that would eventually pay for retirement.  Instead, he says he was conned by fast talk and the lure of big return.

An unlicensed realtor and mortgage broker named Raymond Dela Cruz offered Bird a one-stop shop for real estate investing, including his own appraiser— who illegally inflated the values of the properties bird was buying. “It was appraised and the loan was made for about $78,000,” says Bird. “We know now it’s worth about $40,000 to $45,000.” Bird says he was rushed through the process with no time for property inspections.

Raymond Dela Cruz and the appraiser Laura Atkinson have now pleaded guilty to charges connected to a 70-count mortgage fraud indictment.

“When all this came together and we realized how badly we’d been taken, I was crushed,” says Bird.

The FBI says mortgage fraud cases are up 25 percent this year, 400 percent since 2002.

“The case is hardly unique,” says Chip Burrus of the FBI Criminal Investigative Division. “It goes on both sides of the transaction. Everything from appraisers to mortgage brokers to the customer.”

It’s a sign of the times: Over the past five years, real estate values have surged 50 percent on average. That’s led to a frenzy of loan activity, and a rush of unscrupulous players who are out for quick money.

The most common forms of fraud include falsifying a buyer’s qualifications on loan applications, and “flipping,” where homes are sold at inflated prices to unsuspecting buyers.

“If the deal is too good to be true, it is too good to be true,” says Jim Croft of the Mortgage Asset Research Institute. Croft, who tracks fraud for the mortgage industry, has this piece of advice: “Never sign any document that you haven’t read.  Never sign a blank loan application.”

It’s a warning Richard Bird only wishes he had heeded.