Boomtime prices tell tale

Although mortgage scams often are associated with low-value properties in sketchy neighborhoods, Palm Beach County real estate agents say they're seeing dubious deals in shiny new developments such as Black Diamond, Olympia, Versailles and Nautica Isles.

And in spite of a housing market that has seen a shortage of buyers since late 2005, prices are being recorded at boomtime levels.

"A house is on the market for $450, and all of a sudden it sells for $525, and you're like, 'Huh? How did that happen?" said Eric Grainger, an agent at Keller Williams Realty.

Some examples, according to MLS documents and publicly recorded deeds:

• In Black Diamond, a home listed for $479,000 in January sold for $575,000 in March.

• Also in Black Diamond, a home listed for $489,900 sold for $580,000 in October 2006, even though the MLS reports the sale price as $479,900.

• West of Lake Worth, a home listed for $645,000 last year sold in March 2007 for $699,900. In a phone interview, the seller credited a "bidding war."

For mortgage scammers, cash back at the closing table is just one potential payday. Mortgage experts say the big commissions that accompany risky loans can encourage questionable transactions. If a borrower with stellar credit uses a mortgage broker to take out a conventional loan, the lender pays the mortgage broker about 1 percent of the amount of the loan as an origination fee.

But if a borrower with poor credit uses a mortgage broker to arrange a subprime loan, the lender pays the mortgage broker much more: 5 percent, 8 percent, sometimes more. So a $600,000 loan could generate $30,000 or more in origination fees.

"The subprime mortgage fees can be as much as a third of the value of the home," Swope said. "It's ridiculous."

Now that the market for mortgage-backed securities has dried up and subprime mortgage lenders have been rocked with massive losses, the easy money that fueled the cash-back schemes has disappeared. But not before untold damage was done in the form of fraudulent loans.

The U.S. Attorney's Office for the Southern District of Florida announced a crackdown on mortgage fraud in September. It has indicted alleged scammers in Miami-Dade and Broward counties, and U.S. Attorney R. Alexander Acosta promised more charges in the coming months.

But investigators acknowledge that Johnson Cuffy remains the rare mortgage skimmer arrested. Mortgage fraud investigations move at a glacial pace, and Padich, the state fraud detective, admits many schemers get away with it because few cops have the time and expertise to find clues in phone-book-thick stacks of closing documents.

The irony is that a criminal who robs a bank with a gun can expect to be surrounded by a SWAT team in minutes. But, Padich said, a thief who robs a bank with a bogus appraisal and doctored closing documents can expect to get away with it.