Miami Condo At Ground Zero In Mortgage Fraud

Reuters reports:

At first glance, the 43-story building in Miami's international banking district seems little different from other high-rise condominiums overlooking the turquoise waters of Biscayne Bay.

But the 643-unit condo known as the Club at Brickell is a leader in mortgage foreclosures and it appears also to stand at ground zero in a blizzard of fraud that may lie behind many of the failed loans threatening to bury the U.S. property market.

America's subprime mortgage crisis is partly due to predatory, or aggressive, lenders, hard-sell tactics by mortgage brokers and an easing of underwriting standards in the $10 trillion home-loan industry.

But fraud accounts for a sizable share of the bad bets on mortgages, according to many industry experts, and lenders may have been victimized as much as anyone else.

"The lenders are holding the bag now, that's what we're finding out," said Glenn Theobald, head of a mortgage fraud task force formed in south Florida's Miami-Dade County in September.

Mortgage scams involve a cartel of inside players -- colluding property appraisers, real-estate brokers and accountants willing to draw up fake income statements and tax returns -- who recruit people with good credit histories to serve as a decoy or "straw buyer" in a real-estate deal.

The conspirators inflate the price of the property, to get the biggest loan possible, pay the sellers the original price and then pocket the excess loan money as "cash back" at the closing of the deal.

The decoy buyer is paid off -- often with just $5,000 -- and the property is quickly abandoned to foreclosure, said Theobald, a senior official with the Miami-Dade Police

Hard times for the religion of real estate.