‘House King’ Was a Royal Con Man
When most people buy a home they are
required to submit financial paperwork to banks, title companies, and others
involved in the mortgage process. The case of the “House King” in South Florida
illustrates how when fraudsters manipulate that system, lenders can lose
millions—and innocent buyers and sellers also suffer.
“Imagine,” said Special Agent Denise
Stemen, “a world where buyers don’t fill out any mortgage paperwork and don’t
even read it, because everything on the application is a lie.”
The House King, Angel Puentes, used a
classic loan origination scam, said Stemen, a veteran mortgage fraud
investigator in our Miami office. “In this scheme, you need all the players,”
she explained, from straw buyers—who were paid to lend their name to documents—to
a real estate agent, licensed mortgage broker, and title attorney. Mortgage
applications were falsified to inflate the value of properties, defraud
lenders, and line the pockets of the fraudsters.
Puentes—also known as D’Angelo
Salvatore—was so influential he created his own glossy real estate magazine
called House King. “Five or six years ago he was the guru of South Florida real
estate,” said Special Agent Mark Soucy, who investigated the case, adding that
“100 percent of the funding for the magazine came from the fraud he was
committing.”
The House King paid straw buyers to sign
bogus mortgage applications claiming that purchased homes would be their
primary residences when in reality they had no intention of living there. The
fraud was so extensive that some buyers had closings with three different
lenders on the same day.
An attorney signed off on the fake
documents, and the lenders—believing everything was legitimate—made the loans.
The applications also inflated the value of the properties. If a home was
appraised at $400,000, for example, the bogus loan application might list the
value at $500,000. Puentes pocketed the extra money and used it to pay his
accomplices. He then paid the mortgage for a number of months, until he could
flip the property for a further profit—or sometimes he rented it to generate
more income. But then he stopped paying. After taking his ill-gotten profit,
Puentes simply walked away from the mortgage, leaving the lender with a toxic
asset. Meanwhile, he was living large, taking trips to Paris and buying a
Ferrari.
We began investigating Puentes in 2008.
At the time, before the real estate market began to collapse in South Florida
and around the country, many speculators were buying properties and trying to
flip them for quick profits. But Stemen said, “Our investigation focused on the
organized group that was falsifying documents to profit from the loan
origination schemes.”
Puentes was indicted in February 2011 on
multiple counts of wire and bank fraud and for defrauding three lending
institutions out of approximately $10.5 million. Although he fled the country
for a time, Puentes eventually returned and was arrested. In June 2011, he was
sentenced to more than eight years in prison.
Because of fraudsters such as Puentes,
South Florida real estate was artificially inflated, and innocent people paid
too much for their homes. When the market crashed, many of those homeowners
were left under water—their property worth less than what they paid for it.
“Those are the true victims of this type
of mortgage fraud,” Soucy said—“the legitimate South Florida residents whose
home values were inflated because of these fraudulent transactions.”
Don’t
Be a Victim
Combating mortgage fraud is a priority
for the FBI, and we have more than 90 mortgage fraud task forces and working
groups around the country to investigate crimes estimated to produce annual
losses of more than $10 billion.
The illegal schemes used for obtaining
home mortgages vary based on market conditions, but all have the same result:
they make it more costly and difficult for legitimate home buyers to get loans.
The most common schemes include loan origination, builder-bailouts, seller
assistance, short sale, foreclosure rescue, reverse mortgage fraud, and identity
theft exploiting home equity lines of credit.
Here are some tips to avoid becoming a
victim of mortgage fraud:
- Get referrals for real estate and
mortgage professionals. Check their licenses with state, county, or city
regulatory agencies.
- Do your own research into sale prices
and recent tax assessments of other homes in the neighborhood.
- Don’t make a false statement on your
loan application, like overstating your income or lying about where your down
payment is coming from.
- Never sign a blank document or a
document containing blank lines. Read and review all loan documents signed at
closing. If you don’t understand what you’re signing, get an attorney who can
review the documents for you.
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