Process Flowchart Case Study: Mortgage Fraud Illegal ...

CASE STUDY: Mortgage Fraud ? Illegal Property Flipping Source: United States v. Quintero-Lopez, Indictment, Case No 07-60207-CR-ZLOCH

Real Estate Investor

Home Owner

Begin

Decision FINDER'S FEE (a) contract provision now, (b) contract addendum later, (c) not address

with contract

PROVISION (Now) Reduce the property sellers' net sales proceeds by Finder's Fee amount as payment to Real Estate

Investment Company.

ADDENDUM (Later) Given to Escrow Co. Reduce the property sellers' net sales proceeds by Finder's Fee amount. Seller agrees to pay (or gives credit to) the Straw Buyer at closing for

"improvements" to the residence or for "qualified services rendered". NOTE: May see later escrow payment to Real Estate Investment Company instead.

See NOTE below

Purchase Contract 1

House 1 (example) $775,000

Decision:

Escrow Deposit

NOTE: Purchase Contract establishes purchase price

Check or not

"No" "Yes"

ADDENDUM to Contract with instructions to distribute funds to Real

Estate Investment Co.

NOTE: FINDER'S FEE Instances always included a provision or addendum to the contract which resulted in a distribution from the escrow account to the real estate investment company.

LANE NOTES:

Each lane represents either the noted position or the respective organization. (a) Real Estate Investor ? Real Estate Investment Company (b) Escrow Account ? Title & Escrow Company (c) Loan Officer ? Mortgage Services Company (d) Counterfeiter ? Insurance / Accounting Firm, etc (e) Property Appraiser ? Property Appraisal Company

COLOR NOTES:

(1) Grey ? example from House 1 (2) Peach ? point of origin (3) Green ? financial transaction (4) Pink ? false or fraudulent document (5) Yellow ? decision (6) Red ? end (7) Blue ? court document

Escrow Check (prepared)

Escrow Check (deposited)

House 1 (example) $1,000

Mortgage Application Form 1003 (prepared)

Mortgage Application Form 1003

Straw Buyer

Escrow Account

Loan Officer

Prepared by Alexis C Bell

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CASE STUDY: Mortgage Fraud ? Illegal Property Flipping Source: United States v. Quintero-Lopez, Indictment, Case No 07-60207-CR-ZLOCH

Property Appraiser

Unconfirmed

Property Appraisal (prepared)

Specifications for

Counterfeit Documents

NOTE Loan Officer could also be the Counterfeiter

Counterfeit Documents

Property Appraisal

Decision: Fax or ship?

Loan Application

Packet (prepared)

Loan Officer

Counterfeiter

Counterfeit Documents (prepared)

Verification of Employment Form 1005

IRS Form W-2 Wage & Tax Statement

Paystubs

Bank Statement

Verification Of Deposit

Form

Rental Verification

Rental Lease

Cancelled Checks

Bonus Pmt Letter from Employer

Prepared by Alexis C Bell

"Fax"

"Ship"

Loan Application

Packet

Mail Loan Application

Packet

Loan Application

Packet

Page 2

Shipping Company

Mortgage Lender

CASE STUDY: Mortgage Fraud ? Illegal Property Flipping Source: United States v. Quintero-Lopez, Indictment, Case No 07-60207-CR-ZLOCH

Loan Officer

Mortgage Lender

Fax W-2 Form

(Sent)

Fax W-2 Form

"No"

Decision: to approve

1st Loan or not

END "Yes"

Mortgage Loan Approval for the

1st Mortgage (prepared)

Mortgage Loan Approval for the

1st Mortgage House 1 (example)

$620,000

Wire Transfer

1 for 1st Mortgage

(prepared)

Decision:

to approve 2nd Loan

or not

"Yes"

Wire Transfer 1

for 1st Mortgage

House 1 (example) $637,667.66

"No"

Go to Escrow Account FINDER'S FEE

(next page)

Mortgage Loan Approval for the

2nd Mortgage (prepared)

Mortgage Loan Approval for the

2nd Mortgage House 1 (example)

$150,000

Escrow Account

Straw Buyer

Prepared by Alexis C Bell

Page 3

CASE STUDY: Mortgage Fraud ? Illegal Property Flipping Source: United States v. Quintero-Lopez, Indictment, Case No 07-60207-CR-ZLOCH

Mortgage Lender

Escrow Account

Wire Transfer

2 for 2nd Mortgage

(prepared)

Wire Transfer 2

for 2nd Mortgage

House 1 (example) $152,740.77

"No"

Is there a contract provision or addendum

reducing property seller's net sales by FINDER'S FEE

amount?

Go to Loan Processing

Fees Payment (1)

--- "Yes" --Provision or addendum amount

is equal to the total amount designated to the

Real Estate Investment company.

--- "No"--Total amount goes to Real Estate Invt Co

STRAW BUYER KICKBACK:

Is there a distribution to the Straw Buyer for "improvements" to the

residence or for "qualified services

rendered"?

"Yes"

Wire Transfer (i)

for Straw Buyer Kickback (prepared)

House 1 (example) $19,594.18

NOTE: STRAW BUYER KICKBACK There are three scenarios for payment:

(1) paid from Real Estate Investor directly by check (2) paid from Real Estate Investor as an Escrow Account distribution for a contract provision or addendum (3) paid from:

(a) Real Estate Investor to the Loan Officer for KICKBACK, then (b) Loan Officer to the Straw Buyer by check

Wire Transfer (i)

for Straw Buyer Kickback

Straw Buyer

Prepared by Alexis C Bell

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CASE STUDY: Mortgage Fraud ? Illegal Property Flipping Source: United States v. Quintero-Lopez, Indictment, Case No 07-60207-CR-ZLOCH

Escrow Account

NOTE: Remainder of total amount

designated goes to the Real Estate

Invt Co

Wire Transfer (ii)

for Finder's Fee (prepared)

House 1 (example) $42,405.82

Wire Transfer (i) and (ii) total $62,000

ffooWWrr(ii1FprreesirnteMTTdp((iierriaio))aarrr'nnestgssdFaff)eeegrree

"No"

Decision: Loan Officer KICKBACK

or not?

Go to Loan Processing Fees Payment (1)

"Yes"

Decision: Loan Officer KICKBACK to include Straw Buyer Fees

or not?

---"No"---

---"Yes"--Amount is inflated By Straw Buyer Fee

WireChTeracnksfer for Loa(nii)Officer forKFICinKdBerA'sCFKee

(prepared)

NOTE: There are two check scenarios: (1) COMPANY CHECK is issued from the Real Estate Investment company bank account (2) CASHIER'S CHECK is purchased with funds which are withdrawn from the company bank account

Real Estate Investor

Check For Loan Officer

KICKBACK

Loan Officer

Prepared by Alexis C Bell

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