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17 penalized in 'mortgage flipping'
As part of an elaborate mortgage-flipping scheme that has bilked lenders and blighted neighborhoods, a vacant house in the 5300 block of South Laflin Street sold for $165,000 last year and was resold for twice that amount just hours later, state officials said Tuesday. After a three-month investigation, 17 businesses and individuals have been disciplined for their involvement in a mortgage-fraud ring that falsified documents and created bogus appraisals, Illinois Department of Financial and Professional Regulation officials announced Tuesday.
Chicago Tribune
17 penalized in 'mortgage flipping'
By Mary Owen
Tribune staff reporter
May 8, 2007
As part of an elaborate mortgage-flipping scheme that has bilked lenders and blighted neighborhoods, a vacant house in the 5300 block of South Laflin Street sold for $165,000 last year and was resold for twice that amount just hours later, state officials said Tuesday.
After a three-month investigation, 17 businesses and individuals have been disciplined for their involvement in a mortgage-fraud ring that falsified documents and created bogus appraisals, Illinois Department of Financial and Professional Regulation officials announced Tuesday.
Mortgage flipping involves purchasing a property for below market price and reselling it—often later that day.
Called the new street hustle by gang members, mortgage fraud is raking cities like Chicago as con artists use high-tech identity theft and face-to-face scams to secure six-figure bank loans that are never repaid.
Officials said actions against mortgage brokers, loan originators, appraisers and title agencies involved in the ring included license revocations and suspensions. State officials said criminal prosecution is likely.
The state regulating agency and the Mortgage Fraud Task Force, which was created by Gov. Rod Blagojevich in 2005, are investigating 120 additional property transactions for wrongdoing, officials said.
"We're out there, we're watching you," said Dean Martinez, secretary of the state regulating agency.
Bogus appraisals that bloated the value of a property were the most common offense, Martinez said. In many cases, appraiser license numbers were stolen to create a false appraisal.
For example, Craig Allen, a Chicago firefighter and part-time appraiser who participated in Tuesday's news conference, was fraudulently listed as the appraiser in most of the problem transactions. However, Allen was on duty as a firefighter when the purported appraisals were done, officials said.
The phony appraisals were then presented to lenders, which granted loans.
All of the property transactions under investigation involved Next Generation Housing Inc. as a lender. State officials said an investigation of Next Generation Housing showed that it was operating without a license and it was involved in an unusually large number of transactions for a firm that size.
Next Generation Housing is owned by Tom Hanka, who also is the co-owner of Tri-Star, a title company whose license was revoked, state officials said. Hanka was unable to be reached for comment Tuesday.
The house at 5332 S. Laflin St. was sold and resold Feb. 28, 2006, using what state officials said were bogus appraisals. Officials said the sale was brokered by Kelly Husband, a loan originator and owner of New Family Mortgage Inc. and included a fraudulent appraisal. No mortgage payments have been made, officials said.
Husband and New Family's licenses have been suspended, officials said.
Husband said Tuesday afternoon that she has done nothing wrong.
"I am 100 percent innocent of these allegations," Husband said. "I have never ever fraudulently created or altered any appraisal. I know that these allegations will be proven false."
She declined to discuss the specifics of the Laflin Street transaction because of the investigation and deferred to her attorney, Edward W. Williams, who declined to comment.
As part of a 2005 series on mortgage fraud, the Tribune showed how New Family emerged when a related mortgage firm called Express Mortgage was shuttered amid tax debts, civil allegations of fraud and an ongoing criminal probe.
Following the 2005 Tribune series, U.S. Sens. Barack Obama and Dick Durbin introduced a bill that would ratchet up enforcement and create a national database of brokers who have been disciplined. That bill did not pass, but Obama and Durbin reintroduced the so-called "STOP FRAUD Act" last month.
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