GoToby.com Triggers $9M Mortgage Fraud Investigation in Palm Coast, FL - 11 Arrested

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The real estate news website submitted 18 suspicious Palm Coast, FL real estate transactions to authorities. A lengthy investigation by the Florida Department of Law Enforcement led to 15 persons being charged with one count of criminal racketeering and one count of conspiracy to commit racketeering, both first-degree felonies.

It takes only a few fraudulent appraisals to raise the value of an entire neighborhood.

Florida-based real estate news website GoToby.com triggered a $9 million mortgage fraud investigation that spanned three counties in Northeast Florida when it submitted 18 suspicious transactions to Florida's Department of Financial Regulation. A 3-year investigation dubbed "Operation Fast Cash Kickback" was led by the Florida Department of Law Enforcement. As a result, 15 individuals were each charged with one count of criminal racketeering and one count of conspiracy to commit racketeering, both first-degree felonies. Eleven were arrested. There are arrest warrants for the remaining four.

The Probable Cause Affidavit, FDLE case #ST-11-0016, describes the scam, which allegedly occurred from February 2006 to June 2007:

The sales prices of the properties were significantly higher than the original listing price.

The sales contracts were modified to include an addendum which directs payment to the buyer.

A large amount of the seller's proceeds were directed to the straw buyer for "renovations." A third party individual or shell company received the proceeds, which ranged from $25,000 to $320,000. The third party recipient returned a majority of the funds back to the buyer. No renovations were ever conducted.

The appraisals were inflated to match the sales price.

The straw buyers overstated their income on the Uniform Loan Application (1003 Form)

The Title Company required the seller to sign "hold harmless" agreements to ensure that the seller would not sue them for disbursing the seller's proceeds to a third-party.

All the homes have since been foreclosed by the lenders.

Most of the loans obtained were 100% financed by the lender.

GoToby.com publisher and real estate analyst Toby Tobin believes that mortgage fraud played a major role in the escalating home prices that characterized the housing bubble. "It takes only a few fraudulent appraisals to raise the value of an entire neighborhood," says Tobin. The length of the investigation illustrates the difficulty in prosecuting mortgage frauds. "Real estate transactions are complex," says Tobin. "They are paper intensive and cross several regulatory, jurisdictional, and geographic boundaries. Unfortunately, most cases will go unreported, uninvestigated, and unprosecuted."

For a more detailed report of the case, read Flagler Beach Real Estate Agent Charged in $9M Real Estate Fraud.

About GoToby.com LLC:

GoToby.com is a popular and often quoted real estate news website from Palm Coast, Florida, focusing on local and national real estate trends, fraud, litigation, and private communities. Toby Tobin and GoToby.com have been quoted in several leading publications including the NY Times, Denver Post, Philadelphia Magazine, Golf Digest, and Links Magazine. Tobin is also a contributing writer for the weekly Palm Coast Observer.

Contact:

Toby (Don) Tobin, Publisher and licensed Realtor®
GoToby.com LLC
GoToby.com Realty LLC
(386) 931-7124
http://www.GoToby.com

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