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Mortgage fraud has impact on Solon
Mortgage fraud has impact on Solon
By SUE REID
Although no individual Solon residents have been directly victimized by mortgage fraud, the community as a whole has suffered plenty, according to Detective Lt. Christopher P. Viland, of the Solon Police Department.
"The specific types of mortgage fraud most prevalent in Solon have to do with new-construction fraud," he said. "There is not anybody who is a resident of this city who has been directly victimized by mortgage fraud.
"There are not people going door to door to innocent residents and victimizing them," he said.
Residential development that has suffered the greatest impact has been homes in the Preserve subdivision, off of Liberty Road, Thornbury, between Bainbridge and Aurora roads, and Chagrin Highlands, off of Liberty Road, Mr. Viland said. Homes in those areas range from $400,000 to well over $1 million, he said.
"We have had substandard housing that has been built and properties where the real-estate taxes are not being paid," Mr. Viland said. "That leads to a shortfall for city services and, more importantly, a bigger shortfall with the school system," he said.
"We have quality-of-life issues with neighborhoods where there are vacant houses all over the city," he said.
The upside is that the possibility for mortgage fraud to continue is "less and less," Mr. Viland said. That is because lenders have changed how they do business now that the "horse is out of the barn," he said.
"It's going to be a period of years while the vacancies are resolved and properties go to their true owners," he said. "It will resolve itself but take time."
In the meantime, Solon police have worked diligently to bring the criminals committing mortgage fraud to justice.
One detective works full time with the mortgage fraud investigations and is assisted by Mr. Viland on a part-time basis. A second officer is currently being trained in mortgage fraud investigations, he said.
Solon is one of the few suburbs in Cuyahoga County that is actively participating in mortgage fraud investigation and prosecution, Mr. Viland noted. "We were one of the first, therefore a lot of other agencies are looking to us for guidance and assistance when they have problems, based on our level of knowledge."
Solon's first round of indictments for mortgage fraud began in January 2007. "We subsequently have indicted at least 20 different individuals and corporations, and of those 20, we have a 100 percent conviction rate on our indictments. These involved 35 separate properties in Solon with an aggregate loan value at a minimum of $10 million, he said. In addition, there were many indictments and convictions relating to properties in neighboring Glenwillow, which is in the Solon school district.
"We hope to bring to justice as many of the people responsible for this as we can," Mr. Viland said.
The most "infamous" conviction the police had last year, Mr. Viland said, involved a cab driver who owned a $600,000 house in Chagrin Highlands and never saw it. "The house is the tool to facilitate this type of fraud," he said.
Mortgage fraud involves criminals using fraudulent documents and schemes to defraud a lender out of proceeds that should be used for the purchase of a home. Mr. Viland said that a typical scenario is, when there is a house with a real value of $100,000, a mortgage transaction is created where an unqualified buyer shows that this transaction through fraudulent means is a $170,000 house. Money-laundering schemes are used to put that $70,000 excess into the pockets of the criminals.
Mr. Viland said that a key concept that many people may not understand is that, with mortgage fraud, there is a perception that the house is the object of the fraud.
"That is absolutely untrue," he said. "None of the criminals want to end up with a house, but rather cash in their pocket.
"It's the funds they are getting out of it. That's why many of these houses are sitting vacant." In fact, he said, there are many people with a house in their name, that may not even know they owned the house and sold the identity."
Another misconception in relation to mortgage fraud involves the fact that whether a house is occupied has to do with what a police department does, Mr. Viland said.
"People assume they are connected in some way," he said. The police are authorized to charge people criminally and punish them by putting them in prison and fining them, but someone getting kicked out of a house by eviction or foreclosure has to come from the owner of property, not the police, he said.
Mr. Viland said it is possible that the police can convict someone of a crime and they can remain in the house.
"The foreclosure process is sometimes over 18 months long," he said. "There's a possibility we can convict someone of a crime quicker than a house can be foreclosed on, which means they can remain in the house until foreclosure is complete," he said.
"Sometimes the neighbors think that because the person is still there, nothing is going on. That is not true," he said. "It's just outside of the realm of what we are able to do at the police department."
In general, Mr. Viland said, it is becoming more and more difficult to perpetrate mortgage fraud "now that lenders have tied up their restrictions" as well as the publicity surrounding the crime.
"Con artists find whatever the next trendy way is to defraud someone out of money until that dries up and they move onto the next thing," he said.
On the other hand, Solon does have a large elderly population, and those residents should not be dissuaded from going to the police for help if they have been the victims of predatory lending or conned into a situation where they lose money on a house, Mr. Viland said. "That is a crime, but we have been lucky we haven't had to deal with it."
For the situation on the whole to improve, "the real-estate market needs to self-correct, because the entire economy was connected to this real-estate bubble," he said.
"This self-correction will take longer than usual," he said, "but the market will correct itself, and the true value of the houses will become known." The true owners will start to occupy those residences, and, as that happens, the neighborhoods will improve, Mr. Viland said.
"The problem will be that the inflated values on these mortgage fraud properties, will bring others neighboring property values down lower," he said. "That's the byproduct of having inflated values."
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