How Some Homebuilders and Developers Comitted Mortgage Fraud Schemes

Some homebuilders and developers regrettably were involved in the massive mortgage fraud that helped trigger the present recession.

 A  Federal Financial Institutions Examination Council (FFIEC) White Paper (PDF) labels one common scheme the "Builder Bailout." and describes it as follows: 

A builder bailout occurs when a builder, who has unsold units in a tract, subdivision, or condominium complex, employs various fraudulent schemes to sell the remaining properties. In stressed economic or financial conditions, a builder may be pressured to liquidate remaining inventory to cover financial obligations. To sell the remaining properties, the builder may use a variety of tools including, but not limited to, hidden down payment assistance or excessive seller concessions to elevate the sales price. As a result of the scheme, the unsuspecting financial institution is often left with a loan secured by inflated collateral value and the “real” loan-to-value is greater than 100 percent.

Here are some of the more prominent cases as reported by the Mortgage Fraud Blog:

Home Developer Charged With Unlawfully Selling Houses

Conviction in 18 Million Mortgage Fraud Scheme

Home Builder Ordered to Pay Restitution Penalties

Home Builder Sentenced for Defrauding Mortgage Lenders

2 Mortgage Brokers Plead Guilty to Fraud

 Defendant Pleads Guilty in Mortgage Fraud Case

Real Estate Developer Pleads Guilty in 50 Million Bank Fraud Scheme