MORTGAGE FRAUD SCAM ‘Dream Homes’ Turns into Nightmare

4/27/2009 FBI News Release:

The company had all the trappings of success—its top
officials lived lavish lifestyles, kept a fleet of chauffeur-driven
cars, and donated generously to charities. And it used slick marketing
to sell its “Dream Homes Program,” which promised to pay homeowners’
mortgages in return for an up-front fee that would be invested in
profitable business ventures.

But the dream turned into a $70 million nightmare for more than a thousand investors—among the latest victims of mortgage fraud.

According to federal grand jury indictments unsealed today, the five
people behind Metro Dream Homes and the bogus mortgage payment program
were actually running an elaborate deception—one eventually unraveled
through the cooperative efforts of federal and state law enforcement
agencies.

“The effects of this wide-ranging mortgage fraud scheme are
particularly disturbing against the backdrop of today’s economic
environment,” said Thomas J. Harrington, Executive Assistant Director
of our Criminal, Cyber, Response, and Services Branch.

Here’s how the scam worked:

• Between 2005 and 2007, victims were persuaded into investing at
  least $50,000 with Metro Dream Homes, either by refinancing their
  existing homes or buying new homes at inflated prices.
• Investors
  were told not to worry about high mortgages because Metro Dream Homes
  would pay their future monthly payments and pay off their mortgages
  within five to seven years using returns on the homeowner’s original
  investment. Then the homeowner and Metro Dream Homes would own an equal
  interest in the home.
• Victims were told that their $50,000—not
  including an administrative fee of up to $5,000—would be used to fund
  investments in automated teller machines, flat-screen TV displays that
  carried commercial advertisements, and Touch-N-Buy electronic kiosks
  that sold telephone calling cards and other items.
• To make the
  scam seem more legitimate, the company marketed its program through
  live presentations at posh hotels in Washington, D.C.; Baltimore; and
  even Beverly Hills, California.

In the end, it was a classic Ponzi scheme: the proceeds from later investors went to pay the mortgages of earlier investors. The ATM machines, flat-screen TVs, and electronic kiosks never generated any meaningful revenue, federal prosecutors contend.

And the bulk of the money? It lined the defendants’ pockets—with
$200,000-a-year salaries, luxury cars, and travel to major sporting
events like the 2007 Super Bowl.

By the time law enforcement shut down the company, homeowners had
already invested about $70 million. When Metro Dream Homes stopped
making the mortgage payments, the homeowners were left holding the bag.
The defendants, meanwhile, are facing long prison terms for multiple
counts of fraud, conspiracy to commit money laundering, and other
charges.

At a press conference today at the Department of Justice to announce
the indictments, Harrington said that to combat the recent “exponential
rise in mortgage fraud investigations,” the FBI has increased the
number of agents who investigate mortgage fraud from 120 in 2007 to
more 250 today. We participate in 18 mortgage fraud task forces and 47
working groups across the country.

“One of the best tools the FBI has in its arsenal for combating
mortgage fraud,” he said, “is its long-standing partnerships with other
federal, state, and local law enforcement.”

If you have been the victim of a mortgage fraud scheme or have information about one, call your local FBI office or submit a tip electronically.

Resources:
- Press release 
- Mortgage fraud webpage