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OFFICE OF THE GOVERNOR ROD BLAGOJEVICH - GOVERNOR |
NEWS |
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| For Immediate Release: May 8 , 2007 |
Contact: Abby Ottenhoff Rebecca Rausch Gerardo Cardenas |
312-814-3158 217-782-7355 312-814-3158 |
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Blagojevich Administration officials take
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125 Chicago area properties scrutinized in wide-ranging enforcement action |
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CHICAGO – Under direction from Governor Rod R. Blagojevich, officials from the Illinois Department of Financial and Professional Regulation (IDFPR) and the Governor’s Mortgage Fraud Task Force (MFTF) today announced a series of disciplinary actions against more than a dozen real estate licensees, including mortgage brokers and loan originators, allegedly involved in a ‘mortgage flipping’ scheme – buying houses below market rates and re-selling the same properties for artificially higher prices. The scheme, centered in the Chicagoland area, involved more than 100 properties, said IDFPR officials during a press conference called to disclose the results of a three-month investigation. “This kind of unlawful scheme hurts everybody in a community, from the seller of a property, to their neighbors, to potential homebuyers who might end up paying outrageous interest rates. We will not tolerate fraud against homeowners. I’m pleased the Mortgage Fraud Task Force has shown once again that we can fight mortgage fraud and help protect homeowners and homebuyers across Illinois,” said Gov. Blagojevich. The fraud ring was uncovered when title insurance examiners from IDFPR found Next Generation Housing, Inc. listed as the first lender on a closing document for a Chicago property that was flipped on the same day. Next Generation is owned by Tom Hanka, also the co-owner of Tristar, a title company whose license has been revoked. These types of transactions involved several IDFPR-licensed professionals and complicated financial transactions. The State will continue its ongoing investigation into 120 additional suspect files. Ticor, the underwriter for Tristar has been the model of corporate responsibility and has provided a forensic accounting team that has already begun unraveling the multiple transactions included in these files. IDFPR has uncovered significant evidence of criminal fraud, and has been working with law enforcement authorities including the Cook County State’s Attorney’s Office, the Department of Housing and Urban Development, and the Illinois Department of Revenue. The fraud ranges from falsifying the documents needed to secure the financing for these transactions, to forging appraisals, and hiding income. Shortly thereafter – sometimes within hours – the first purchaser re-sells the property, often to another sham purchaser. For the second sale, an appraisal is required by the legitimate lending institution involved in the re-sale of the property. Fraudulent appraisals created for these secondary transactions inflate the properties’ values by as much as $100,000 to $200,000 beyond the price received by the original owner hours earlier. Once the second deal is concluded, money from the second lending institution is disbursed to all the parties involved in the flip: the first sham buyer, the realtor or ‘finder’, the first lender, and sometimes to people not directly involved in the chain of the transaction. Among the five transactions analyzed by IDFPR, only one house is currently occupied by the second purchaser. Four of the five properties are vacant, and two are undergoing rehabilitation. “These types of investigations take a long time, but stopping mortgage fraud is a major part of IDFPR's efforts to protect consumers in Illinois”, said Dean Martinez, Secretary, IDFPR. “Gov. Blagojevich understands that fraud hurts everyone and has put in place the ways and means by which we can more effectively stop mortgage fraud and protect Illinois families.” Ms. L.T. (her full name has been withheld for privacy reasons) had lived in her family home in West Chatham for more than 40 years. In 2006, her home was purchased by ZMG Investment Trust, which is solely owned by Tyrone Mathews. On the same day, the property was re-sold to Mathews for approximately $215,000. The house is currently vacant. Mathews, until today, was registered with IDFPR as a loan originator; a formal complaint has also been filed against his appraiser’s license. Another loan originator, Cynthia Woodcox ordered, or allowed Mathews to use her name to order an appraisal which was supposed to be done by a third party licensed appraiser, but in fact was fraudulently prepared by Mathews to inflate the value of the property. Ms. Woodcox’s loan originator registration was also revoked today. “To learn that the company that bought our home turned around and sold it -- less than an hour later -- for $100,000 more than we received, just disgusted me,” said Ms. L.T. “Either the company that bought our house lied to us or they lied about the house when they got the new mortgage. And the saddest part of all is that after being our family’s home for 40 years, that house is a vacant eyesore in our old neighborhood.” The property located at 5332 S. Laflin was abandoned and has recently been boarded up. The sale of the property was brokered by Kelly Husband, a loan originator for New Family Mortgage, Inc. and included a fraudulent appraisal. The lender providing the money to secure the second mortgage has filed a repurchase demand with New Family Mortgage because no mortgage payments have been made. IDFPR has suspended the licenses of both New Family and Ms. Husband. On December 7, 2006, a home at 7746 S. Greenwood was sold for $130,000. On the same day, the home was sold for $275,000. This house is vacant. Another property, located at 1330 S. Komensky, is currently under a stop-work order by the City of Chicago. Its owner had begun renovations without obtaining the proper licenses and permits. The loans for both the Komensky property and the Greenwood property were processed by an unregistered loan originator, and included fraudulent appraisals as part of the loan packages submitted to lenders. The unregistered loan originator, Deangelis Smith was ordered to cease and desist his unlicensed practice, and the mortgage brokers, Illinois Mortgage Associates, Ltd. and Appex Financial Group, Inc. have been disciplined. Appex has had its license suspended. Craig Allen, a Chicago firefighter who works part-time as a licensed residential appraiser, learned he was the victim of identity theft. Mr. Allen’s name and license number were used in several of these flipping schemes – at times when he was on duty at the firehouse and thus could not have been the appraiser of record. As a result, Mr. Allen has been unable to obtain contracts to appraise properties; his good reputation and ability to earn an income have been stolen along with his license number. Individuals and companies named in the disciplinary actions relating to the house flipping scheme and other fraudulent transactions taken by IDFPR include:
Tyrone Matthews: Appraisal Gov. Blagojevich’s Mortgage Fraud Task Force was established to ensure that mortgage companies comply with the strict standards of conduct established for loan originators in the 2003 High Risk Home Loan Act. One of the most important provisions of the law requires people who process mortgages to undergo training and background screening before being entrusted with borrowers’ financial and personal information. Loan originators must also pass a rigorous screening test to make sure they understand loan processing. The work done by MFTF complements the regular examinations conducted by IDFPR as part of its regulatory responsibility to ensure that residential mortgage companies provide safe, effective services to the homebuyers and homeowners in Illinois.
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