Mortgage Fraud- Man Guilty of “Observing a Felony and Failing to Prevent It”

Jan. 24, 2011 - PRLog -- Where does mortgage fraud begin and how do we prevent – or at least begin to stop – mortgage fraud? They say timing is everything, and in this case, there has never been a better time to commit – or fall prey to– mortgage fraud.

One of the most difficult aspects of dealing with mortgage fraud is that it’s hard to know the scope of the problem. The human element that’s involved makes would-be fraudsters hard to spot, and those already committing fraud even harder to identify.

Please remember fraud is not just a white-collar crime; it’s a people crime. People commit it, people suffer in its wake, people’s lives are ruined, people enforce it, and its people like you and I who can prevent it.

A man who failed to report criminal activity as part of a mortgage fraud scheme pleaded guilty to one felony in U.S. District Court and was convicted of one count of misprision of a felony, which is punishable by up to three years in prison and a fine of up to $250,000.
In common law, misprision of felony is observing a felony and failing to prevent it, knowing about it and failing to disclose it, or concealing the felony without any previous agreement with the person committing it.

Hancher operated a business known as Ultra Enterprises, Inc., which was engaged in the purchase, renovation and re-sale of certain depressed rental properties located in Ohio, according to a statement of facts filed with Hancher’s plea.

Hancher entered into various real estate transactions involving Gregory S. Chew. Chew acted as a real estate “facilitator” through his businesses known as Raging Bull Enterprises, Inc, a/k/a R. B., Inc.  During this time frame, Chew located purchasers for approximately 15 separate properties owned by Hancher, according to the statement of facts.

Hancher knew that Chew was engaging in fraud by on the sly providing down payments for buyers and making false claims on loan documents. Hancher failed to notify authorities of his knowledge of Chew’s criminal activities, according to the statement of facts.
Hancher also took steps to conceal these crimes while continuing to operate Ultra Enterprises, Inc. and continuing to transact business with Chew, according to the statement of facts.

A jury convicted Chew in March of fraud, conspiracy and money laundering. Chew is awaiting sentencing. U.S. District Judge Thomas M. Rose will set a sentencing date for Hancher.

Once a white-collar criminal gets away with fraud, the process quickly becomes addictive. Success breeds more success, and before long such crafters of fraudulent mortgage loans clearly begin feeling that not only are they above the law but in fact, they are not doing anything wrong in the first place. Fraud can happen to anyone: loan officers, processors, underwriters, buyers, sellers, investors, owners, and management of mortgage companies. It can happen anywhere: big cities, small towns, storied and well-recognized firms, smaller mom, and pop businesses who just want to do the right thing for a would be homeowner or just have the need to make money.

Clearly, the amount of money to be made in real estate - both residential and commercial - lends itself to abuse. New employees mean new training, and lack of new training leads to old mistakes. The growth of fraud is insidious; it creeps up on us, taking us by surprise until, before we know it, someone we work with, someone we work for, or even those who work for us, is committing fraud.

It is so easy, so slick, and until now so largely un-enforced. A number fudged there, a figure left out here, a bogus appraisal, a friend of a friend who plays it fast and loose with a client's verification of rent, a fabricated credit report, and soon enough a mortgage loan is fraudulent.

Willful blindness is another legal term that skirts the boundary between neglect and culpability, and I wouldn't be able to talk about it if it didn't exist. To be honest, fraud does not exist in a vacuum. It arises from opportunity, and more often than not that opportunity exists because we are too busy minding the high-rise to success that we're working so hard to build to check on the rats steadily chewing away at our foundations.

Until we stop fraud on a loan-by-loan basis, establishing significant penalties and sobering preventative measures, fraud will continue to reach epidemic proportions in our industry. We must be vigilant against fraud, recognizing its signs and taking proactive, definite, and realistic steps to not only prevent it but also punish it.

While we are busy running our companies or processing loans, fraudsters are spending all their time - and I do mean all, as in every waking second - thinking of new, inventive, and difficult to detect ways to do what they do. It is nearly impossible to keep up with such dedicated, aggressive, and workaholic criminals.

We cannot turn a blind eye to fraud, as not only does this make some an unknowing accessory or in this case a knowing accessory, but also it is the very reason fraud remains so rampant. Those who would commit fraud know that few will report it if they are discovered and, even if they do, by then they will have moved on to avoid penalty. The only way to stop such a widespread, global problem is to look ourselves squarely in the mirror and promise to fight fraud wherever, and whenever, we can, one loan at a time.

We must look to ourselves; not as the cause, but the solution. To fight fraud, though, we must first understand it.

Michael S. Richardson
Managing Director-Chief Quality Officer
www.preventmortgagefraud.com
michael@preventmortgagefraud.com

Author of "An American Epidemic, Mortgage Fraud a Serious Business"
Read more @ Mortgage Examiner's Articles
Follow me on Twitter “FocusonFraud”

Mortgage Origination needs to be in compliance with Federal and State laws and an effective Quality Control Plan is necessary to ensure that loans are salable in the secondary market and follows Fannie Mae’s Loan Quality Initiative (LQI)

# # #

We are committed to being your Third-Party Neutral mortgage professionals, although we’re flexible in our approach with Mortgage Quality Control . We work hard to bring value to our clients and the guidance we provide is practical. Mortgage Origination needs to be in compliance with Federal and State laws and an effective Quality Control Plan is necessary to ensure that loans are salable in the secondary market and follows Fannie Mae’s Loan Quality Initiative (LQI)

Consulting and Litigation Services, we investigate mortgage files for mortgage fraud, predatory lending practices and real estate fraud, and offer opinions based on industry standards and practices.