From the Washington Post:
Housing Boom Tied To Sham Mortgages
The man was one slick fraud artist.
Phillip Hill lured people to fancy cocktail parties in a $1.9 million mansion. He asked to use their names and credit histories in real estate deals, promising to make them rich. Most got $10,000 checks on the spot for signing up.
By the time the scam unraveled, the credit of those participants had been ruined, hundreds of upscale properties had fallen into foreclosure and real estate prices had plummeted in some of this city’s most exclusive neighborhoods. Hill is about to go to federal prison.
Many experts have concluded that the nation’s real estate boom of recent years was fueled in part by weakened lending standards that sparked excessive demand and drove up prices. Now, some are worried that the looser standards may have permitted a boom of another kind — a big expansion of mortgage fraud.
No one knows exactly how extensive the crime has become, but new data from the federal government suggest that it has jumped tenfold since 2000. Prosecutors are finding cases all over the country in which sham transactions, based on fraudulent appraisals, led to homes changing hands at far above their real value. Mortgage lenders failed to carry out the most elementary safeguards.
In some neighborhoods, mortgage fraud became so extensive that it drove up overall home prices. That is what happened in Atlanta. Hill, 50, was convicted last month in what authorities call one of the biggest mortgage-fraud cases in U.S. history. It involved 400 fraudulent loan applications; nearly $100 million in mortgages; and 120 closing attorneys, appraisers, mortgage brokers and others who prosecutors say were in on the scam.
$$$ NEW JERSEY: Kara Homes buyers may lose deposits
6 unfinished developments sold
Posted by the Asbury Park Press on 04/10/07
BY DAVID P. WILLIS
BUSINESS WRITER
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TRENTON — Several prospective Kara Homes Inc. home buyers all but lost their deposits Monday after a bankruptcy court judge approved the sale of six uncompleted developments to developers and a bank.
An option now is to try to recover a portion of their money as unsecured creditors in the bankruptcy case, said Barry W. Frost, a lawyer for some of the Kara buyers. They would only recoup their money once secured lenders, such as banks, are paid.
Jerrold Fried, 42, of Berkeley, who put down $135,000 on a house at Kara’s Dayna Estates in Toms River, is not hopeful he’ll see any money.
“Unfortunately, in the end of the big bankruptcy, my wife and I are the ones that are going to suffer, and my children,” Fried said. “Everybody else goes before me even though he used my money to build the development.”
Two weeks ago, Kara sold six uncompleted developments for about $19 million at an auction that failed to generate much interest.
One, Dayna Estates, was purchased by Metropolitan Mortgage and Realty Inc. of West Orange and APS Contractors Inc. in Paterson.
Three others, Prospect Ridge Estates in Stafford, Hartley Estates in Little Egg Harbor and Sterling Acres in Monroe, were bought by Magyar Bank, the bank that loaned Kara Homes money to build the projects. Magyar will try to sell them on its own.
The two remaining developments, Woodland Estates and Park Meadow, both in Edison, were purchased by Fenix Investment & Development, a Morristown-based home builder that agreed in December to buy the developments. The sale was subject to the auction.
The projects were sold free of any contractual obligations.
“No great solutions”
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