Conn Real Estate Agent Admits Defrauding Bank In Short Sake Mortgage Fraud

[ShortSaleArtisan]

Saw this posted from a lawyer in Connecticut on Twitter, I thought it was an interesting read:

http://www.mortgagefraud.org/storage/natera_pr.pdf

CONNECTICUT REAL ESTATE AGENT ADMITS DEFRAUDING BANK IN SHORT
SALE MORTGAGE FRAUD SCHEME

Nora R. Dannehy, United States Attorney for the District of Connecticut, announced that
SERGIO NATERA, 35, a licensed real estate agent residing in Bridgeport, pleaded guilty today
before United States Magistrate Judge Holly B. Fitzsimmons in Bridgeport to one count of bank
fraud stemming from his involvement in a “short sale” mortgage fraud scheme.

A short sale transaction involves a mortgage holder or lender entering into an agreement to
release its mortgage or lien on real property in exchange for payment of less than the total amount
owed on the underlying debt. Many short sale transactions are legitimate.

According to court documents and statements made in court, NATERA worked with another
real estate agent to defraud Regions Bank, which held two mortgages on a residential property in
Bridgeport. On December 5, 2007, the other real estate agent, who was a listing agent for the
property, received an offer to purchase the property for a price of $132,500. However, NATERA
subsequently communicated to Regions Bank that the highest offer to purchase the property was
for $102,375 by BOS Asset Management, LLC, an entity that NATERA controlled. The bank
agreed to a short sale of the property for the lower price, and released its mortgages on the
property.

On June 9, 2008, NATERA, through BOS Asset Management, sold the property for $132,500
to the original bidder on the property.
NATERA is scheduled to be sentenced by United States District Judge Janet C. Hall on April
30, 2010, at which time he faces a maximum term of imprisonment of 30 years, a fine of up to $1
million, and an order of restitution.

This matter is being investigated by the Federal Bureau of Investigation and is being
prosecuted by Assistant United States Attorney Ann M. Nevins.

In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced
the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute
mortgage fraud cases and related financial crimes occurring in Connecticut. In addition to
investigating past mortgage fraud schemes, the Task Force will focus on emerging crime trends
that are associated with the growing tide of foreclosures, including foreclosure rescue schemes,
and short sale schemes. Citizens are encouraged to report any suspected mortgage fraud activity
by calling 203-333-3512 and requesting the Connecticut Mortgage Fraud Task Force, or by
sending an email to ctmortgagefraud@ic.fbi.gov.

This is the PERFECT example of where DISCLOSURE, DISCLOSURE, DISCLOSURE comes into full force.
 

[ShortSaleArtisan]

Another one, only a few days later!

Nora R. Dannehy, United States Attorney for the District of Connecticut, announced that ANNA McELANEY, 38, a licensed real estate agent residing in Norwalk, pleaded guilty today before United States Magistrate Judge Holly B. Fitzsimmons in Bridgeport to one count of bank fraud stemming from her involvement in a “short sale” mortgage fraud scheme.

A short sale transaction involves a mortgage holder or lender entering into an agreement to release its mortgage or lien on real property in exchange for payment of less than the total amount owed on the underlying debt. Many short sale transactions are legitimate.

According to court documents and statements made in court, McELANEY worked with Sergio Natera, also a real estate agent, to defraud Regions Bank, which held two mortgages on a residential property in Bridgeport. On December 5, 2007, McELANEY, who was a listing agent for the property, received an offer to purchase the property for a price of $132,500. However, McELANEY and Natera subsequently directed communications to Regions Bank that the highest offer to purchase the property was for $102,375 by BOS Asset Management, LLC, an entity that Natera controlled. The bank agreed to a short sale of the property for the lower price, and released its mortgages on the property.

On June 9, 2008, Natera, through BOS Asset Management, sold the property for $132,500 to the original bidder on the property, and Natera and McELANEY retained the difference in the two sale prices.

McELANEY is scheduled to be sentenced by United States District Judge Janet C. Hall on May 10, 2010, at which time she faces a maximum term of imprisonment of 30 years, a fine of up to $1 million, and an order of restitution.

Natera pleaded guilty to one count of bank fraud on February 11, 2010. He awaits sentencing.

This matter is being investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorney Ann M. Nevins.

In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. In addition to investigating past mortgage fraud schemes, the Task Force will focus on emerging crime trends that are associated with the growing tide of foreclosures, including foreclosure rescue schemes, and short sale schemes. Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 and requesting the Connecticut Mortgage Fraud Task Force, or by sending an email to ctmortgagefraud@ic.fbi.gov.

The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation Division; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General, and State of Connecticut Department of Banking.&/p

[MichaelQuarles]

This is why you should, if an agent,   never enter into an agency relationship with the seller when buying short sales... 

[ryanpal]

This is why you should, if an agent,   never enter into an agency relationship with the seller when buying short sales... 

you might want to clarify this statement michael.  on A-B B-C purchases, A is the original seller and B (the investor) is both the buyer and the seller.  Buyer on transaction A-B  ...seller on transaction B-C. 

the agent represents me (i'm on the listing agreement not the homeowner) for the B-C transaction in which i'm the seller.  they are able to do this via the option contract.

[MichaelQuarles]

I thought it was clear never create agency with the seller if the agent is the buyer

[NJbird_dog]

That article raises a lot of questions:
How did the bank know the agent had ownership in the LLC?
or that it was sold again 6 months later by the same agent?
How did they know that the $132k offer wasn't an entirely new offer that came 6 months after the closing?

MQ, you say not to create agency with the seller, but from what I know, if you are a RE agent then you have that agency/fiduciary responsibility by default. I was told that you could have them sign a document stating that "I'm an agent, but not acting as an agent on this transaction". But if it comes down to it, how likely will that document hold up if a seller claims they were taken advantage of by a licensed professional? What's your view on that?

SSArtison, are you referring to disclosure as in disclosing to the bank that the property will be resold?


I haven't worked with option contracts, but my solution to this article would be:

A to B:
Homeowner sells to an LLC that has "no relation" with the agent/investor.
Property doesn't get listed until the offer gets approval.
Once the all cash offer is approved, then the marketing begins.

B to C:
The LLC owner gets his own listing agent/marketing methods.
All offers coming in, go directly to the LLC, not the original
Once a higher offer comes in, the LLC closes A to B all cash and the first agent/investor get paid and are out of the picture.

Then for B to C, the LLC sells it to the end buyer.

What are your thoughts on doing it this way?

[NJbird_dog]

.

[ryanpal]

A to B:
Homeowner sells to an LLC that has "no relation" with the agent/investor.
Property doesn't get listed until the offer gets approval.
Once the all cash offer is approved, then the marketing begins.

this is ok if you dont mind holding costs.

if you have the ability to legally market the property while negotiating with the bank w/out putting the agent at risk..why not excercise it?

[NJbird_dog]

this is ok if you dont mind holding costs.

if you have the ability to legally market the property while negotiating with the bank w/out putting the agent at risk..why not excercise it?

I wouldn't hold onto it.. after approval, the bank will give about 30 days + a few extensions to get things closed. It's within that time frame that I'd get the end buyer and once the buyer is in place, then both closings would happen in the same day.

You're right, option contract is definitely the better route. I just don't know many people using it regularly without any issues.

Have you closed with option contracts and had no issues? Do you disclose to the bank directly that the property will be resold after closing? I spoke to an out of state investor who used option contracts and he said he had his contract recorded at the court house. So during the B to C closing, the end buyer's financing bank will pull up the deed on the house, and the LLC won't be on the deed, but it will show up on the option contract. You've had no trouble with the LLC not being on the deed during the title search on the B to C closing?

[ryanpal]

this is ok if you dont mind holding costs.

if you have the ability to legally market the property while negotiating with the bank w/out putting the agent at risk..why not excercise it?

I wouldn't hold onto it.. after approval, the bank will give about 30 days + a few extensions to get things closed. It's within that time frame that I'd get the end buyer and once the buyer is in place, then both closings would happen in the same day.

You're right, option contract is definitely the better route. I just don't know many people using it regularly without any issues.

Have you closed with option contracts and had no issues? Do you disclose to the bank directly that the property will be resold after closing? I spoke to an out of state investor who used option contracts and he said he had his contract recorded at the court house. So during the B to C closing, the end buyer's financing bank will pull up the deed on the house, and the LLC won't be on the deed, but it will show up on the option contract. You've had no trouble with the LLC not being on the deed during the title search on the B to C closing?

my partner closes with these option contracts weekly.  i'm working on getting my current deals closed.  only one of them had an issue so far..i was using an old version.  no other banks have mentioned any issue with the option contract.

disclose to the bank directly? considering im sending them the exact contract that states i will be reselling for a profit..that's all the disclosure i need to provide.

30 days in my opinion is way too little.

-how do you know if the payoff you received is low enough?
-if get an end buyer in a few days before your pay off expires there's no way they will close in time

there's other issues as well.  short sales are complicated enough..this route definitely wouldn't make sense for my system

[Summit]

See and it all comes back to RUN CLEAN TRANSACTIONS! LOL

[Strategery]

Quick question.... in the example from this article, would the investor have been OK if they didn't have the contract from the end buyer first?  Meaning if they got the short sale approved for $102k first and then sold it for $132k after the fact they wouldn't have gotten into trouble, correct?  My attorney advised me that as long as there are no other offers on the table while negotiating the short sale where you now know the property is worth more, then you are OK.  Also, do you always disclose to the bank that you are purchasing this property for resale?  I have an affidavit for the homeowner that I will be reselling the property for profit, but I don't give that to the bank.  I'm an agent so I just disclose to the bank that as the buyer I'm a licensed agent.  Also I do not represent the seller, there is another listing agent involved.  Just want to make sure I do things the right way and stay sqeaky clean.  No reason to jeapardize my family or livelihood when money can be made legally and ethically.  Thanks for your thoughts...