Monday, July 13, 2009

2 Indicted For $2.5M Flipping Scam

Rodney Dumas, 39, Farmington Hills, Michigan, a mortgage broker, and Derek Walker, 30, Oxford, Michigan, president of Fidelity Funding, have been charged for their roles in a fraudulent flipping scheme.

On July 7, 2009, a criminal complaint was filed in the Eastern District of Michigan alleging Dumas and Walker conspired to obtain fraudulent mortgages by "flipping" properties. Other members of this conspiracy have already been indicted in United States v. Pierre Greene, et al., Criminal Case 2:08 20362, pending before the Honorable Gerald E. Rosen.

The conspirators used a mortgage fraud scheme commonly known as "flipping." In this scheme, Rodney Dumas (or other conspirators) would buy a run-down property, or a property in foreclosure, for a very low price; often, the properties were completely uninhabitable. Dumas might purchase the property in his own name, or in the name of a company he has established for that purpose, CMB Investments. As quickly as possible, Dumas would resell the property. He would obtain a fraudulent appraisal of the property that grossly inflates its value. He would then pay an individual with a good credit rating willing to act as a "straw buyer," obtaining a mortgage on the property in the amount of the falsely inflated appraisal and then letting it go into default. If necessary, Dumas and his co-conspirators would supply false employment and bank account documents, and even create false Federal Income Tax Returns, to support the mortgage application of the straw buyer and to persuade the lending institution that the buyer would be able to re-pay the mortgage loan. On occasion, Derek Walker paid underwriters and others whose job it was to review the mortgage applications to "look the other way" and ignore irregularities. Relying on the series of false representations, the banks approved the mortgages and paid the conspirators the inflated value of the property at closing. Dumas, Walker and their co-conspirators, usually including the straw buyer, would then divide the proceeds of the fraud and the mortgages went into default. The banks were left with significant losses and nearly worthless collateral.

To date, losses attributed to this mortgage fraud conspiracy total over $2,500,000. This case was investigated by the Detroit Metro Mortgage Fraud Task Force, led by the FBI and the U.S. Postal Inspection Service, and is being prosecuted by Assistant United States Attorney Cynthia Oberg.

United States Attorney Terrence Berg stated, "Mortgage fraud has many victims and a host of negative consequences for our community. These cases are good examples of how we will continue ramping up our efforts to investigate and prosecute this damaging crime."

Special Agent Andrew G. Arena stated, "Mortgage fraud continues to have significant consequences on the Michigan economy. We no longer can wait for mortgage fraud to come to law enforcement after the crime has occurred. Today, through the efforts of several agencies and financial institutions attached to the Task Force, mortgage fraud is being fought from the front, as the Task Force aggressively works to stop mortgage fraud before the loan funds and before someone's property is stolen out from underneath them. The message we are sending today is if you are currently engaged in mortgage fraud, the person sitting across the table from you at closing could be an undercover FBI agent."

Maurice Aaoute, Special Agent in Charge of IRS Criminal Investigation said, "These types of crimes create a significant loss of tax revenue, drive buyers into foreclosure, leave lenders burdened with bad loans and neighborhoods with abandoned and deteriorating properties. IRS CI is committed to pursuing individuals who create such havoc."

The Detroit Mortgage Fraud Task Force will continue to set up and use new proactive methods to combat Michigan's mortgage fraud in order to get out in front of the problem and to disrupt and dismantle mortgage fraud rings currently operating in Michigan.

Additional information can be found on the FBI's website at http://www.fbi.gov, search Mortgage Fraud. To report illegal activity related to mortgages in Detroit or anywhere in Michigan; please call the Detroit Mortgage Fraud Hotline at 313-237-4530, http://www.tips.fbi.gov, or the Wayne County Register of Deeds' Deed Fraud Hotline at 313-224-5869.

mortgage fraud