Bob Ipock
Elite Member
- Joined
- Jan 15, 2002
- Professional Status
- Certified Residential Appraiser
- State
- North Carolina
(honest appraiser simply can not compete with crooked ones)
Mortgage fraud sentencing illustrates anything-goes lending environment
By MARK MORRIS
The Kansas City Star
If you wonder how we got to this point — a $700 billion Wall Street bailout for toxic mortgages — the case of Raymond Zwego is a good place to start.
While on probation from a previous Kansas City federal bank fraud conviction in 2003, Zwego began constructing his own little housing bubble. He purchased 61 area properties, in many cases using straw buyers and falsified paperwork. He fueled the exercise by illegally obtaining $16.9 million in mortgages, willingly contributed by lenders who never realized they were dealing with a career con man until it was far too late.
Almost all of the homes he purchased eventually went into foreclosure, contributing to the tsunami of red ink that has come perilously close to sinking the country’s financial system.
At Zwego’s sentencing on federal mortgage fraud charges Tuesday, his lawyer, Daniel Harrington, acknowledged that the bygone days of anything-goes mortgage lending contributed to his client’s crimes.
“If the mortgage industry was then what it is now, this wouldn’t have happened,” Harrington said.
Chief U.S. District Judge Fernando Gaitan sentenced Zwego to 10 years in federal prison and slapped him with an additional three years for violating probation on his bank fraud conviction. Gaitan also ordered Zwego, 60, to pay $5.6 million in restitution.
In passing sentence, Gaitan noted that Zwego’s conduct has had a “long-range and devastating impact on our community.”
“It’s clear this society has to be protected from a predator like Mr. Zwego,” Gaitan said.
Zwego, whose rap sheet contains federal convictions for wire fraud and interstate transportation of forged securities and state convictions for theft and stealing, addressed the judge. He was apologetic and brief.
“I’m sorry, your honor, for the things I have done that have brought me here today,” he said.
The mortgage-default portion of the current economic crisis has a host of causes, including many subprime lenders not being required to follow the tougher regulations that apply to commercial banks. Too often they put borrowers into homes, and loans, they could not afford.
But Zwego also showed what a dedicated con man could do in such an environment.
Zwego’s scheme collapsed in 2006 when he tried to purchase a home from former Jackson County Executive Katheryn Shields and her husband, lawyer Philip Cardarella. While prosecutors indicted the couple in the conspiracy, a federal jury subsequently found them not guilty of all charges.
In that deal, Zwego obtained an inflated $1.2 million appraisal of the Shields home, which had been listed for about $700,000. While Shields and Cardarella were promised their asking price, Zwego sought to obtain more than $400,000 in management fees in the deal, which the FBI stopped before it went through.
But lots of other deals were completed. According to federal court records, 54 of Zwego’s 61 property closings during that period eventually resulted in $5.6 million in losses to 25 mortgage lenders, including some of the biggest names in the industry, such as Washington Mutual and Countrywide Financial. One lender, IndyMac Bank, closed earlier this year.
Nearly 50 of Zwego’s closings resulted in foreclosures, and many of those homes still stand vacant.
In addition to Zwego, eight other co-defendants pleaded guilty or were convicted at trial. They included everyone a scheme like this needed, including straw buyers, a loan officer, a title company closer, an appraiser, a real estate agent, a certified public accountant and Zwego’s office help.
Mortgage fraud sentencing illustrates anything-goes lending environment
By MARK MORRIS
The Kansas City Star
If you wonder how we got to this point — a $700 billion Wall Street bailout for toxic mortgages — the case of Raymond Zwego is a good place to start.
While on probation from a previous Kansas City federal bank fraud conviction in 2003, Zwego began constructing his own little housing bubble. He purchased 61 area properties, in many cases using straw buyers and falsified paperwork. He fueled the exercise by illegally obtaining $16.9 million in mortgages, willingly contributed by lenders who never realized they were dealing with a career con man until it was far too late.
Almost all of the homes he purchased eventually went into foreclosure, contributing to the tsunami of red ink that has come perilously close to sinking the country’s financial system.
At Zwego’s sentencing on federal mortgage fraud charges Tuesday, his lawyer, Daniel Harrington, acknowledged that the bygone days of anything-goes mortgage lending contributed to his client’s crimes.
“If the mortgage industry was then what it is now, this wouldn’t have happened,” Harrington said.
Chief U.S. District Judge Fernando Gaitan sentenced Zwego to 10 years in federal prison and slapped him with an additional three years for violating probation on his bank fraud conviction. Gaitan also ordered Zwego, 60, to pay $5.6 million in restitution.
In passing sentence, Gaitan noted that Zwego’s conduct has had a “long-range and devastating impact on our community.”
“It’s clear this society has to be protected from a predator like Mr. Zwego,” Gaitan said.
Zwego, whose rap sheet contains federal convictions for wire fraud and interstate transportation of forged securities and state convictions for theft and stealing, addressed the judge. He was apologetic and brief.
“I’m sorry, your honor, for the things I have done that have brought me here today,” he said.
The mortgage-default portion of the current economic crisis has a host of causes, including many subprime lenders not being required to follow the tougher regulations that apply to commercial banks. Too often they put borrowers into homes, and loans, they could not afford.
But Zwego also showed what a dedicated con man could do in such an environment.
Zwego’s scheme collapsed in 2006 when he tried to purchase a home from former Jackson County Executive Katheryn Shields and her husband, lawyer Philip Cardarella. While prosecutors indicted the couple in the conspiracy, a federal jury subsequently found them not guilty of all charges.
In that deal, Zwego obtained an inflated $1.2 million appraisal of the Shields home, which had been listed for about $700,000. While Shields and Cardarella were promised their asking price, Zwego sought to obtain more than $400,000 in management fees in the deal, which the FBI stopped before it went through.
But lots of other deals were completed. According to federal court records, 54 of Zwego’s 61 property closings during that period eventually resulted in $5.6 million in losses to 25 mortgage lenders, including some of the biggest names in the industry, such as Washington Mutual and Countrywide Financial. One lender, IndyMac Bank, closed earlier this year.
Nearly 50 of Zwego’s closings resulted in foreclosures, and many of those homes still stand vacant.
In addition to Zwego, eight other co-defendants pleaded guilty or were convicted at trial. They included everyone a scheme like this needed, including straw buyers, a loan officer, a title company closer, an appraiser, a real estate agent, a certified public accountant and Zwego’s office help.