Mortgage Fraud Rising in Las Vegas
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Some of the biggest gamblers in Las Vegas may turn out to be mortgage lenders. Now, the FBI is asking if their game is rigged. Las Vegas is one of many places where home prices skyrocketed in recent years. Now that home prices are slipping, that city's real estate market is one of those targeted for investigation.
The FBI is examining 14 financial institutions. NPR's Dina Temple-Raston reports from the city where mortgage fraud may be the worst.
DINA TEMPLE-RASTON: Here's the sound you probably most associate with Las Vegas:
UNIDENTIFIED WOMAN: Cocktail?
TEMPLE-RASTON: But very soon, Las Vegas may be famous for something else.
Law enforcement officials fear it is fast emerging as the mortgage fraud capital of America. Supervisory Special Agent Scott Hunter heads up the FBI's Las Vegas white-collar crime unit. He says he's been fielding dozens of calls a week about possible mortgage fraud.
Mr. SCOTT HUNTER (Supervisor Special Agent, FBI): I think this is only the tip of the iceberg. I think not just here in Las Vegas, I think all around the country. It's all on the rise in drastic numbers. One of the local detectives that I work with quite a bit in this stuff said that they used to get a complaint a month and now they get several complaints a day.
TEMPLE-RASTON: Hunter said the schemes vary but one common scenario involves giving fake buyers five or ten thousand dollars to put their names on loan applications for a number of houses in the same neighborhood. As soon as the houses close, dirty appraisers then inflate the price and investors quickly resell, pocketing the difference.
The practice has wreaked havoc on Las Vegas because when foreclosures pop up in a neighborhood, all property values suffer. Jim DePalma of Loan Servicing Solutions is one of the people trying to refinance some of the subprime loans in Vegas. He says a recovery is years away.
Mr. JIM DEPALMA (Loan Servicing Solutions): Depending on your perspective, another two to three years of pain until this inventory can be absorbed and the markets can stabilize again.
TEMPLE-RASTON: I wanted to see what the speculation had done to local neighborhoods, so I met up with the area's largest private home builder, Tom McCormick, to tour some of those neighborhoods.
So we're driving around in your car now and we're actually looking for houses that are foreclosed in more the northwest part of Las Vegas?
Mr. TOM MCCORMICK (Founder, Owner, Astoria Homes): Correct.
TEMPLE-RASTON: McCormick is the founder and owner of Astoria Homes. I chose him as my guide because he dodged the mortgage fraud bullet but not allowing investors to come in and buy up his homes in bulk.
Mr. MCCORMICK: When this whole thing started, we had the experience of people walking in out of the blue - it just surprised us. This was like, back in 2005 - and offering to buy 10 homes. And we've never sold 10 homes to people. And we knew that the 10 homes would be this - obviously no one's going to live in 10 homes, so we'd have a bunch of rentals.
TEMPLE-RASTON: McCormick didn't want the rentals and turned down the bulk- buy offer. Because of that, Astoria Homes has been relatively untouched by the rampant schemes. McCormick says he can see how it all happened. Housing prices were up nearly 50 percent during the boom, and some people just couldn't resist jumping in. What no one planned on was the market going upside down.
A house someone bought for $300,000 was suddenly worth $270,000. McCormick and I pull into a gated community in northwestern Las Vegas.
Mr. MCCORMICK: This is the neighborhood, and this is different than what I expected.
TEMPLE-RASTON: Different because we aren't driving among small, boarded-up houses. We are cruising a narrow street lined with $700,000 homes. They are two- and three-story hacienda style residences with leaded glass in the front doors and paver driveways. We make a left on a street called Walkashon(ph). What we see is stunning. Nearly every house has a for-sale sign staked in the front yard. McCormick drives by slowly.
Mr. MCCORMICK: Here's one that says foreclosure. It says bank-owned properties up to 40 percent below market value. And there's a Web site, bankfallouts.com. Across the street is one that says, well, the phone number is 456-REPO.
TEMPLE-RASTON: This one street accounts for millions of dollars in foreclosures and is part of the reason why prices are down all over the city. FBI officials says they are closing in on some of the speculators, and they expect to announce major mortgage fraud indictments in the coming months, including one in which scam artists managed to buy as many as 250 homes with virtually no money down.
Dina Temple-Raston, NPR News.
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