Appraiser Sentenced in Massive Mortgage Fraud Case

admin —  February 2, 2010 — 5 Comments

Lila Rizk, 43, Rancho Santa Margarita, California, a former state-licensed real estate appraiser, was sentenced to three years in federal prison and ordered to pay more than $46 million in restitution for her role in a massive mortgage fraud scheme that caused tens of millions of dollars in losses to federally insured banks. Rizk received the three-year prison term after her conviction last summer on conspiracy, bank fraud and numerous loan fraud charges.

As previously reported on Mortgage Fraud Blog, as per the court documents (part 2 of court documents), the evidence presented at Rizk’s trial last summer showed that she was part of a wide-ranging and sophisticated scheme that obtained inflated mortgage loans on homes in some of California’s most expensive neighborhoods, including Beverly Hills, Bel Air, Holmby Hills, Malibu, Carmel, Mill Valley, Pebble Beach and La Jolla. Members of the conspiracy sent false documentation, including bogus purchase contracts and appraisals, to the victim banks to deceive them into unwittingly funding mortgage loans that were hundreds of thousands of dollars more than the homes actually cost. Lehman Brothers Bank alone was deceived into funding more than 80 such inflated loans from 2000 into 2003, resulting in tens of millions of dollars in losses.

The evidence presented at trial showed that Rizk profited by collecting hundreds of thousands of dollars in fees for providing inflated appraisals in the scheme. Her appraisals typically valued the homes three times higher than what the homes really cost. In order to supposedly justify these inflated values, Rizk used “comps,” or comparable homes, that were far bigger, more luxurious, and in better neighborhoods than the homes she appraised. Once she had inflated a few dozen homes, she then used those homes as “comps” to supposedly justify inflated prices for homes later in the scheme.

Ten other real estate professionals have been convicted of federal charges related to the scheme. They are:

Charles Elliott Fitzgerald, scheme leader, a developer formerly of Newbury Park and Beverly Hills, California, who previously was sentenced to 14 years in prison.
Mark Alan Abrams, Los Angeles, California, a mortgage broker who along with Fitzgerald orchestrated the scheme, who is scheduled to be sentenced on April 12, 2010.
Nicole LaViolette, Palm Springs, California, a loan processor, who is scheduled to be sentenced on June 14, 2010.
Jamieson Matykowski, Laguna Niguel, California, who found houses for the scheme, is scheduled to be sentenced on March 29, 2010.
Timothy Holland, Santa Ana, California, an escrow officer, who is scheduled to be sentenced on July 19, 2010.
Richard Maize, Beverly Hills, California, a mortgage banker, who is scheduled to be sentenced on June 28, 2010.
Thomas R. Schiff, Brentwood, California, a mortgage banker, who was previously sentenced to 6 months in prison.
L. Scott Robinson, Dana Point, California, an appraiser, who is scheduled to be sentenced on April 2, 2010.
Kyle Grasso, formerly of Santa Monica, California, a real estate agent, who is scheduled to be sentenced on February 19, 2010.
Joseph Babajian, Los Angeles, California, a real estate agent, who is scheduled to be sentenced on February 22, 2010.

Rizk was sentenced by United States District Judge Dean D. Pregerson, who warned that other professional real estate appraisers should know that if they inflate appraisals and lie about the value of homes, “there is an overwhelming likelihood that they will be caught and go to prison.”

This case is the result of an investigation by the Federal Bureau of Investigation and IRS-Criminal Investigation.

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5 responses to Appraiser Sentenced in Massive Mortgage Fraud Case

  1. I think we are all correct in our thinking. I also commend anyone that refuses to bend the rules and stand up for what is right. It is to bad that we only hear about the bad guys. My experience with Appraisers has always been good. Now lenders that is another story,my computer does not have enough memory for those stories.Thanks for sharing

  2. The problem will never go away as long as there are dishonest people. And we know what that means. To handle dishonest people, you need rules, regulations, and “gatekeepers”.

    I commend any appraiser that refuses to fall in to the trap of kissing up to lenders or brokers. I suffered my time of being picked on by managers when I was underwriting, and funding.

    My most recent job was analyzing appraisals, they are trying to do a better job, but there are still a few bad eggs out there.

  3. The appraiser is just a puppet. I am unemployed and broke because I have turned numerous requests to do appraisals in a way that is misleading. There are two ways to have misleading appraisals. One is by value. The other is time requirements that required by an assignment. THE SECOND IS IMPOSED BY MANAGEMENT COMPANIES AND LARGE BANKS WHO WANT TO CLOSE LOANS AS QUICKLY AS POSSIBLE. Unfortunately even with the HSVCC imposed by Mario Cuomo JR. who does not what the hell he is doing these changes have still let the dog out (mortgage brokers and banks). I recently stopped recieving orders because my appraisals were coming in low for one large mortgage bank. Its all about writing loans and the greed involved. The same way credit card companies target people with credit scores less than 650. They want cows on the pasture. Nobody wants to here the truth. When there is the problem it becomes the appraiser’s problem. The appraiser is not allowed to define the problem. Most appraisers are honest but for the few bad ones the honest ones pay the price. This problem will never go away as long as the big banks are allowed to make the decisions and pay off (lobby) the politicians in making the rules.

  4. Were you on top of the market 2000-2003? I doubt it…

    Being on top of it is a more recent event. Most lenders didn’t listen then, as they needed their market share. Even when the underwriters raised red flags they ignored it. You also have to realize new tools are now available to help review the appraisals.

    But I agree, Shame on the appraisers and Shame on the lenders.

  5. So Lehman Bros had no idea that the homes were not worth that amount. Our company account officers have an excellent idea of home values. We stay on top of the market.Shame on the Appraisers and Shame on the lender. The appraiser got away with it because the lender allowed it.

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