What's good for the goose...

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Time and time again throughout the various mortgage fraud cases we've written about we find a reoccurring theme used by the government to go after the alleged fraudsters.  In the Plantation Cops mortgage fraud trial, it seems that every other word out of the prosecutions mouth is that the defendants had made false statements on their 1003 loan applications, specifically that the borrowers lied about the property that they were borrowing on being their primary residence.  From the indictment...

e. Defendants signed and caused to be signed at closings Affidavits of Occupancy, Mortgage Notes, Disclosure Notices, Borrowers' Certification and Authorization forms, and other documents indicating that the property they were purchasing was to be owner-occupied and their primary residence, when in fact, these defendants had no intention of living in these properties...that upon the occupancy of the property, they would not have any other permanent and primary residence; and that they were not occupying or purchasing the property for investment purposes;

Simple enough, the governments contention is that by the borrowers allegedly lying about the homes in question being their primary residences, they were able to enjoy a lower interest rate and therefore lower monthly payments for these homes that were actually investments purchased solely with the intention of resale.  Despite the fact that it's been proven ad nauseum that the borrowers did not indicate that they homes were going to be primary residences and that it was the mortgage brokers, Matt Gulla and Rene Rodriguez Jr., that had altered the loan applications and forged the borrowers signatures to reflect that the homes that were being purchased were going to be primary residences, every chance the prosecution gets they ram this primary residence thing down the courts throat.  Once again...

Form 1003, for the first mortgage loan on said property and occupancy agreements for the first and second mortgage loan on said property, which contained materially false and fraudulent statements.

I'm not sure why the prosecutors keep harping on this "primary residence" thing but judging by their reluctance to let up on the home the borrower resided in (regardless of the fact that it's been proven that the borrowers had not declared the homes were primary residences or not), you'd think that lying about your primary residence is a big deal, in fact from what we've now learned it's a federal offense!  That brings me back to another instance we've seen where one of the people we've written about has lied about their primary residence on a mortgage, does anyone remember this guy...

That's City of Miami commissioner Marc Sarnoff, the same commissioner that seemed to have trouble figuring out where his primary residence was, from our friends over at Investigation Miami...

So here's the rundown of Marc Sarnoff's primary residences per mortgage records:

• 1993 3197 Virginia

• 1998 3000 Shipping

• 2000 3100 Virginia

• 2001 3197 Virginia

• 2002 3100 Virginia

• 2010 Marc Sarnoff - 3000 Shipping, Wife Teresa - 3100 Virginia

Based on what we've seen in the various mortgage fraud cases we've written about, shouldn't this be a major issue?  Once again from Investigation Miami...

I wonder what the bankers would think of a guy too cheap to pay a little higher interest rate on an investment property loan so he would not tell the truth by saying the property is his primary residence.   I wonder what the Florida bar would think of an attorney who has demonstrated a habit of fibbing on bank loans.  I'm not naive, I know a lot of people do it.  But Marc David Sarnoff is an attorney.  And to him, the LAW should be gold....or something to that effect.

So what gives here?  We've spent months on end hearing the federal prosecutors beat this lying about your primary residence thing being a federal criminal offense into our head, so why haven't the U.S. Attorneys who are so fond of this concept charging commissioner Marc Sarnoff for the same thing?  In fact, Frank Alvarado from the Miami New Times even went so far as to write the U.S. Attorneys office a letter about Mr. Sarnoff lying on his mortgage applications...

Wilfredo Ferrer
United States Attorney, Southern District of Florida
99 NE Fourth St., Miami, FL 33132

Dear Mr. Ferrer,

Banana Republican commends you for cracking down on the scoundrels responsible for the rampant mortgage fraud plaguing South Florida. With that in mind, we want to bring a related case to your immediate attention. We have reason to believe Miami Commissioner Marc Sarnoff is gaming the mortgage lending system.

A man with your keen understanding of mortgage applications knows that when buyers apply for a home loan, they are required to reside at the property if it is not for investment purposes.

Well, it seems Commissioner Sarnoff -- a Florida Bar-admitted attorney who authored ethics legislation for city officials -- has abused the requirement in order to obtain lower interest rates. Banana Republican has reviewed the commission chairman's mortgage documents for three properties he purchased in Coconut Grove between 1993 and 2000. We're pretty sure he hasn't lived at all of them at the same time.

• 3197 Virginia St.: Sarnoff purchased this lovely two-story townhouse for $160,000 in 1993. According to the loan documents recorded with the Miami-Dade County clerk's office, he was required to occupy the property as his primary residence.
• 3000 Shipping Ave.: Five years later, the commissioner upgraded to a beautiful abode for $240,000. Even though he was still required to live at 3197 Virginia per that property's loan documents, Sarnoff affirmed he would reside at 3000 Shipping, according to the mortgage he signed with Northern Trust Bank. 
• 3100 Virginia St.: In 2000, Sarnoff expanded his real estate portfolio when he paid $340,000 for this residence next door to his Shipping Avenue home. His lender, Citibank, stipulated he had to reside at 3100 Virginia. Of course, he was already required by his other mortgage lenders to live at 3197 Virginia and 3000 Shipping.
• What's more, Sarnoff refinanced 3197 Virginia in 2001 and 3100 Virginia in 2006. He again signed documents stating the properties would be his primary residences. (Sarnoff sold 3197 Virginia in 2002.)

We don't need to tell you that lying on mortgage applications has landed a lot of people in trouble in these days of rampant mortgage fraud. Indeed, this past August 30, you squeezed guilty pleas from four defendants who had set up fraudulent mortgage transactions by falsifying information on loan applications.

In the late '90s, then-Miami Commissioner Humberto Hernandez was convicted of using false documents to secure loans from financial institutions. The same treatment should be afforded to Commissioner Sarnoff.

With sincere regards,

Banana Republican

I suppose the claims of selective prosecution by the defendants in the Plantation cops mortgage fraud trial who are accused of doing exactly the same thing that Sarnoff did doesn't seem so far fetched after all.

The problem with City of Miami Assistant Fire Chief Veldora Arthur's mortgage fraud defense.

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We discussed City of Miami Assistant Fire Chief Veldora Arthur's eleven million dollar mortgage fraud indictment in detail last week and also got to hear one of her attorneys defend her in the media...

Bieber called his client “a victim” who “unfortunately associated herself with people who were committing fraud.”

Bieber said that even though Arthur was able to purchase the properties with no money down — a move he said was fairly common during the boom years of the real estate market — she received a payment after the properties closed.

“She believed this was an honest investment during the real estate boom,” said Bieber. 

That last quote is the best, "...an honest investment during the real estate boom," let's indulge the attorney for a moment and accept his explanation for his clients involvement in this massive scheme to defraud, just how far does this believing it was an honest investment thing get his client?  Let's assume that...

• She had no idea there was anything criminal going on.
• She had no part in creating false loan applications
• She had no part in falsifying her income in order to gain nearly $5,000,000 in mortgages.
• She had no part in conjuring up the down payments for these mortgages which her attorney claims she purchased with no money out of pocket.
• She had no part in the proceeds of these purchases that she made being disbursed to third parties with bogus loans on the HUD statements.

So let's assume all of the above are true and for the time being give Veldora the benefit of the doubt.  Now, let's go back and take a look at the mortgages for the properties mentioned in the indictment...


First the mortgage for unit 3711 which closed on February 7, 2006...

veldora arthur first mortgage for 3370 NE 190th street unit 3711 aventura flo 33180

And now the mortgage for unit 3111 which closed on March 6, 2006...

veldora arthur first mortgage for 3370 NE 190th street unit 3111 aventura flo 33180

Anyone see the problem here on these two homes that closed within a month of each other?  Keep in mind that Ms. Arthur lived and still lives in Weston Florida which is located in Broward county and both these mortgages were for homes located in Dade county.  That brings up this detail from the mortgages, as always, click on the image to enlarge...

WHOOPS!  Through her loan applications and by executing these mortgages, Ms. Arthur has represented to the banks that lent her the money for these homes that they are both her primary residences.  Does this scenario ring any bells for our readers?  Our colleagues over at Investigation Miami busted City of Miami Commissioner Marc David Sarnoff for doing the exact same thing, lying about home being a primary residence in order to get a lower interest rate!  Remember mortgage fraud is defined as...

"submitting and causing to be submitted materially false and fraudulent mortgage applications and settlement statements"

There you have it.  Unless Ms. Arthur is going to turn around and say that she didn't execute the mortgages for the homes involved in the $11,000,000 fraud indictment, she's got a long and arduous uphill battle ahead of her in defending herself, that is unless she chooses to use Commissioner Sarnoff's defense for mortgage fraud...

"I don't know anyone who's ever read their mortgage!"

 

Taking a closer look a City of Miami Assistant Fire Chief Veldora Arthur's alleged mortgage fraud misdeeds.

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It looks like the Miami Herald finally got around to reporting on City of Miami Assistant Fire Chief Veldora Arthur's federal mortgage fraud indictment.  From the Herald article...

The indictment says Arthur received a payoff yet had no intention of living on the properties, which eventually went into foreclosure.

Ok, textbook definition of a "Straw Buyer".

Arthur’s attorneys dispute the charges, saying their client actually went to the feds not long after the 2006 purchases took place, and after a friend noticed the paperwork said she was making $123,000 a month, not a year.
Bieber called his client “a victim” who “unfortunately associated herself with people who were committing fraud.”

Victim?  Really?  She had no idea what was going on?

Bieber said that even though Arthur was able to purchase the properties with no money down — a move he said was fairly common during the boom years of the real estate market — she received a payment after the properties closed. 

Hold up, her attorney is admitting that she received payment once the properties closed?  That in of itself isn't proof that somethings wrong?  Isn't the seller supposed to get paid once the property sells rather than the buyer?

Bieber said Arthur was introduced to Fagan through a friend, and was simply looking to make an investment. The plan was to flip the properties for a profit, but, Bieber said, there was no profit because the properties went into foreclosure.
“She believed this was an honest investment during the real estate boom,” said Bieber.

Wait a minute, the attorney is now claiming that Ms Arthur was "was simply looking to make an investment", just a few moments ago he clearly stated that his client was able "to purchase the properties with no money down" and "received a payment after the properties closed".  Once again, isn't this the textbook definition of a "Straw Buyer"?

After examining the indictment a little closer, we've found that all the homes that were used in this mortgage fraud scheme were in the same building located at 3370 NE 190th street in Aventura.  

From the looks of it, the people who orchestrated this scheme found a sweet spot in this condo, units that would appraise high but for one reason or another were having trouble selling on the legitimate real estate market, no different than the sweet spot that John Romney and crew found in the West Grove where they were able to bust out several homes raking in millions of dollars in profits.

Now, let's take apart this mess and see what we can find.  We'll begin with the deeds for the two condos that Veldora purchased, first unit 3111...

veldora arthur warranty deed for 3370 NE 190th street unit 3111 aventura flo 33180

From the documentary stamps we figure the purchase price of this property to be $1,950,000.  That's seems like a ton of money for a 2,720 sqft condo!  Regardless, let's take a look at the warranty deed for unit 3711 in the same building...

veldora arthur warranty deed for 3370 NE 190th street unit 3711 aventura flo 33180

DAMN!  Based on the doc stamps that unit was purchased for a cool two million dollars, same unit as 3111 just six floors higher.

Now, let's look at the mortgages for Unit 3111 begining with the first mortgage for $1,462,500...

veldora arthur first mortgage for 3370 NE 190th street unit 3111 aventura flo 33180

And now the second mortgage for $349,050 on the same property...

veldora arthur second mortgage for 3370 NE 190th street unit 3111 aventura flo 33180

Now, let's move on to the second condo, unit 3711.  Here's the first mortgage for $1,365,000...

veldora arthur first mortgage for 3370 NE 190th street unit 3711 aventura flo 33180

And the second mortgage for $292,500 on the same unit...

veldora arthur second mortgage for 3370 NE 190th street unit 3711 aventura flo 33180

So far so good, let's summarize...

• Unit 3711 purchased on February 7, 2007 for $2,000,000 financed by two mortgages totaling $1,657,500
• Unit 3111 purchased on March 6, 2006 for $1,950,000 financed by two mortgages totaling $1,811,550.

Based on the purchases prices we were able to deduce that means there was a shortage of $480,950 between the two transactions, Ms. Arthur's attorney stated that she put no money down, so who did then?  To further complicate matters, Ms. Arthur turns around a refinances unit 3711 just five months later for a cool $1,680,000...

veldora arthur third mortgage for 3370 NE 190th street unit 3711 aventura flo 33180

Can you imagine the kind of money the mortgage brokers and title companies must have made off of these transactions?!  We're talking over FIVE MILLION DOLLARS worth of loans not to mention the recording and closing costs!  Yet even after signing what looks like hundreds of pages of documents for these purchases and the subsequent mortgages Ms. Arthur's attorney still claims that...

“She believed this was an honest investment during the real estate boom,”

Let's give her the benefit of the doubt, after all our justice system is based on a presumption of innocence for those who've been charged with a crime.  I'm baffled at the thought that Ms. Arthur, someone whose job at the fire department calls for managing payrolls and procurements, someone that is supposed to have a modicum of financial sense could have thought that this was a good or even honest investment?  The mortgage payments alone for these two properties must have been in the tens of thousands, after all she was borrowing nearly four million dollars at 7 to 8% interest!!  That hardly sound like something someone that has any financial sense would agree to especially when interest rates were as low as they were during the peak of the housing bubble.  Let's not forget qualifying for the mortgages themselves, how the hell did a City of Miami firefighter making $180k per year qualify for four different mortgages for close to four million with within one month of each other?

Something is definitely haywire with the statements that Ms. Arthur's attorneys made to the media today but like I said, she's innocent till proven guilty and should be treated as such.  Let's assume that she had no part in falsifying the documents used to obtain these mortgages, let's even assume that she wasn't really a straw buyer and didn't even get cash back after these transactions closed.  Let's say all of those defenses are legitimate, there is one aspect of these transactions that she's not going to be able to explain away though, has anyone figured it out?  

We'll discuss tomorrow, in the mean time think about this question, what do Veldora Arthur, Commissioner Marc Sarnoff and the Plantation cops that were indicted for mortgage fraud all have in common?

Another anniversary...

Depending on how you look at it, yesterday was the three year anniversary of the Miami Dade County Mortgage Fraud Task force's first arrests or the two year anniversary of the Bernardo Barrera mortgage fraud arrests.  So where are we at three years later?  We discovered last week that the we're knee deep in a foreclosure fraud crisis where it's not the borrowers that are committing fraud but the banks through submitting fake and forged documents to the courts.  Does anyone think that the members of the Miami Dade County Mortgage Fraud task force is working over time to prepare cases against these guys?  We also learned a few weeks back that the City of Miami Commissioner Marc David Sarnoff may have committed mortgage fraud, does anyone believe that the people over at the mortgage fraud task force are busy investigating these allegations and preparing a case against him?  Don't hold your breath.


So here we are three years since the inception of the Mortgage Fraud task force that was supposed to be a model for the rest of the nation and what's the impression we're left with?  Based on everything I've seen the only impression I'm left with is selective enforcement of the law.

An explanation for committing mortgage fraud by City of Miami Commissioner Marc Sarnoff, Freudian slip or a carefully planted comment?

We've discussed embattled City of Miami Commissioner Marc Sarnoff and the allegations of mortgage fraud against him recently.  The most serious of the allegations against him are regarding which of his three houses in Coconut Grove are his "primary residence", as we discussed last Tuesday, Mr. Sarnoff has indicated in the mortgages for his three homes that they are all his primary residences and therefore able to enjoy a lower interest rate rather than the rate he would have to pay if he indicated to the lenders that at least two of the home were his second or investment homes.  While this is not a big deal to some, remember this is precisely what the people charged in federal Plantation Police officers indictment are being accused of.


So why would someone lie about their primary residence to their lender?  A fantastic local blog that covers the misdeeds of those in Miami politics Investigation Miami while covering a City of Miami budget meeting came across a most interesting comment from Commissioner Sarnoff last night while discussing city employee pensions...

"Allegations of possible mortgage fraud published here must have been weighing on Marc DAVID Sarnoff when he blurted out an unbelievable statement very early in the day (so he can't blame being worn out when he said it). When discussing changes to the city's pension ordinance Sarnoff says something to the effect 'Reading an ordinance is like reading your mortgage. I don't know anyone who's ever read their mortgage!' Now that is one heck of a statement from an attorney - he doesn't read a contract before he signs it? Or was he saying he doesn't read the ordinances before he votes on them?"

HUH?!  No one reads their mortgage?  I'll buy that.  So Mr. Sarnoff didn't acknowledge the home that he was financing here as a second home because he didn't read the mortgage...

Ok, even though the page has got his initials, maybe he really didn't read it.  Perhaps then on his next mortgage he did read the document he was executing?

Ok, you don't read the document, you forget to check off the part about it being a second home, maybe next time?

Nope, three mortgages, three instance where Mr. Sarnoff didn't read this important legal document, three instances where he forgot check off the part about the home being a "second home", perhaps on the forth try...

Isn't that interesting?  In this fourth mortgage someone checked off the 1 to 4 family rider box!  Now, although people may not read the legal documents that their signing, at the very least my experience with real estate and mortgages reminds me that at closing the closing agent or attorney conducting the closing goes through every page of each document and explains what needs to be checked off  and or signed or initialed as well as explains the pertinent conditions of the mortgage.  Food for thought when considering the "nobody reads their mortgage" defense for committing mortgage fraud.

Yesterday we got the "I didn't know what was going on" defense and today we have a novel new defense "who reads their mortgages", both pretty pathetic excuses from two attorneys.  You're left to wonder though, was this "who reads their mortgages" statement from Mr. Commissioner Sarnoff Freudian slip or a carefully planted comment that foreshadows his defense of the mortgage fraud allegations against him?