Dec 28, 2010
Big, messy mortgage fraud case moves along
28 Dec 2010
Posted by Andrew Kantor
The Total Realty Management fraud case is almost mesmerizing to read about. It’s got everything about the housing crisis in one oozing bundle.
According to the feds and the civil plaintiffs, here’s what happened:
Back around 2006, Virginia mortgage broker Mark Dain and partner Mark Jalajel bought lots of undeveloped land in North Carolina for about $150,000 each.
Dain then recruited his formal high school football coach — now a school principal in Fairfax — to recruit investors, mostly school employees, to buy these parcels for $300,000 or more apiece. (The principal’s brother, an assistant principal at a different Virginia school, also joined in the recruitment.)
The pitch was that these new buyers’ loans would allow them to pay nothing up front or for two years. In the meantime they could flip the land for big profits.
Two problems: In some cases, the buyers couldn’t qualify for a $300,000 mortgage. In other cases, the land didn’t appraise for nearly enough.
According to the suits and the case, Dain and company solved the first problem by falsifying mortgage applications on behalf of their buyers.
They solved the second with banks’ help in getting high enough appraisals.
In one case, plaintiffs lawyer Martin C. Conway said Friday, TRM wanted to sell a lot to a Northern Virginia woman for $380,000. But the e-mails showed that Bank of America’s first appraiser valued the lot at only $210,000. A second appraisal came in at $220,000. Finally, a third appraisal for the same lot came in at $385,000, and the loan was approved.
(The judge in the case, Gerald Bruce Lee, also noted that the insurance companies who were covering the mortgages for the lenders canceled many of the policies because of bank "misrepresentation.")
Of course, the properties weren’t worth nearly as much as the buyers paid, and only dropped in value; today they’re worth (depending on which paper you read) around $16,000 to $20,000 each.
Lawsuits against the the principal and his brother were dropped because they’re deep in bankruptcy. Three TRM employees are going to prison for between two and five years. Mark Jalajel appears to be cooperating with the investigation. Mark Dain … well, that remains to be seen.
So you’ve got everything: shady real estate deals, banks lending more than customers could afford, questionable appraisals, and people thinking they could flip real estate — sight unseen! — and make a bundle. (Although, to be fair, this was 2006 and maybe the concept of "If it sounds too good to be true, it probably is" hadn’t sunk in yet.)
Oh, and — at least according to everything I’ve read — at no point in this process was a Realtor involved. I’d like to think that if any were, at least one would have looked into things, called shenanigans, and saved a lot of people a lot of trouble.
Here, read more about it:
Near the beginning — Fairfax Times story (10/2009)
Latest Washington Post story (12/19)
WaPo on Bank of America (10/9)