There are multiple downsides to a cooling housing markets: sellers don’t profit from their homes, potential buyers are afraid that a Florida home loan won’t be a worthwhile investment and home building companies lower their orders.

Here’s another one: Florida home mortgage fraud has grown in recent years. Specifically, foreclosure fraud is on the rise, as the number of foreclosures has risen about 25 percent in the past year. This type of fraud occurs because the original owner, desperate not to lose the home forever, agrees to lease/buyback terms that are essentially impossible to meet.

From a scammer’s point of view, it all makes perfect sense: Why not find a way to latch onto the most expensive asset most people ever own?

There aren’t precise figures for real estate fraud, but the FBI, which uses the term “mortgage fraud” to describe an array of illegal real estate activities, said in a study last year that “based on various industry reports and FBI analysis, mortgage fraud is pervasive and growing.”

It often works in the following way: those involved often falsely inflate the value of a property or issue Florida home loans based on fictitious properties. The FBI study listed the Sunshine State as one of 10 mortgage fraud “hot spots.”

Other schemes involve phony appraisals and doctored documents such as loan applications. In some cases quitclaim deeds are forged to transfer property without the true owner ever knowing. Then, the fraudulent owner sometimes takes out a second Florida home mortgage.

In the most lucrative forms of real estate fraud, “you can close the deal through the mail and walk away with a half-million dollars,” says says Rachel Dollar, a California-based lawyer who handles fraud recovery for lenders and puts together a Web site called MortgageFraudBlog.com. “It’s not surprising it has become the white-collar crime of choice.”

How can it be stopped?

Industry insiders are reluctant to propose more regulation or bureaucracy because it would slow the pace of business. Even Dollar, the cataloguer of real estate crime, doubts that would work.

She says some foreclosure fraud would be avoided if the original owner read the lease/buyback agreement more carefully. But other forms of real estate fraud, especially those involving industry insiders, are hard to prevent because dishonest people allow it to continue. Just like most crimes.

What can you do about? Just stay informed. Remain in touch with a trusted Florida mortgage broker and remain cautious at all times.

Applying for a mortgage can be difficult enough without having to worry about Florida home loan scams. Unfortunately, many agents and lenders out there take advantage of client ignorance in this area.

But that won’t happen to you now! Here are more scams to avoid as you move forward with your loan application/process …

- Equity stripping: A lender convinces you to take out a Florida home equity loan that you can’t really afford by padding your income on the application to help get it approved. As soon as you fail to keep up with the payments, the lender forecloses. The general rule: If you know your income isn’t high enough to meet the monthly payments on a home equity loan, avoid it.

- Hidden Florida home loan terms/balloon payments: To avoid foreclosure, a new lender helps you refinance by offering lower monthly payments. But read carefully: The payments are so low because you’re only paying interest. When the entire principal comes due in a balloon payment at the end of the term, kiss your house goodbye if you can’t make the payment.

- Loan flipping: You apply for Florida home loan refinancing, in need of money. A few months later, the lender offers you more cash by repeating the procedure. But with each loan, you incur more charges in points and fees. You’ll have a pile of cash, but the pile of debt is much larger AND must be paid back with interest.

- Signing over your deed: A distressed homeowner having trouble keeping up with the mortgage is pursued by another lender, who tells him it’s necessary to deed the house over to him in exchange for new financing. Often, the money never comes, and the scam artist sells the property to someone else.

- Lease options: Landlords lure wannabe homeowners by signing them up to rent a home with lease-option financing. Typically, the renter will pay as much as $16,000 above the market rental rate, with that extra money earmarked for a down payment. Usually, however, the money is wasted, as the renter fails to qualify for a Florida home loan and never buys the house.

- Florida home improvment loan lies: A contractor offers to arrange a loan through which you can pay for a remodeling or a major repair. After he begins the work, you’re asked to sign a bunch of papers that you find out later were authorizations for a home equity loan, complete with inflated interest rates, points and fees. To add insult to injury, the contractor, who has taken his cut from the lender, has little incentive to stick around and finish the job.

Now you know. Equipped with information about how various scams work, you should be assured of a fair, affordable home buying process.

Representative Randy Johnson, a Republican from Celebration, Fla., said Wednesday that if he wins the election for Chief Financial Officer this November, he would urge legislators to crack down on predatory lending schemes that are bankrupting too many Florida homeowners.

According to the Palm Beach Post, Johnson offered up a five-point plan to combat problem and predatory Florida home loans. Among the components of his plan is a standard disclosure form that would clearly show borrowers how much their home loan would cost for each of the first 12 months.

The plan also would provide them with information about non-traditional, exotic mortgages, a quick and inexpensive dispute resolution system for consumer complaints, and better advertising regulations in the growing non-traditional mortgage field.

Johnson held up some low-interest mortgage advertisements received through faxes and e-mails Wednesday, calling them examples of how Florida home loan promises can be misleading and cause severe financial damage to many of the state’s vulnerable residents.

He also distributed copies of a Palm Beach Post report detailing struggles with high-interest loans during the recent spike in home prices and subsequent affordable housing crunch. That review found more than $25 million in Florida home mortgage loans in Palm Beach County collapsed in less than 90 days during 2005 alone.

Johnson’s opponent in the Republican primary, Senate President Tom Lee, has said that many foreclosures are more market-driven, due to the cooling off of the Florida housing market, along with high property taxes and soaring insurance premiums.

Lee, who has been closing mortgages for his residential construction company for 20 years, said the advertising concerns raised by Johnson are federal issues that state officials may not have much control over. He added, however, that the state should crack down on predatory lenders and set up a better customer dispute system.

“It’s definitely worth peeling back the layers of this issue and seeing what Florida can do,” Lee said.

Be careful.

That’s the message Mark Fleming, chief economist at CoreLogic, has for potential home buyers in today’s housing market. Mortgage fraud is “getting worse,” he said, speaking on behalf of the provider of fraud prevention technology that publisher of the quarterly Core Mortgage Risk Monitor.

It’s more important than ever to be on the lookout for a Florida home loan scam. The number of mortgage-related suspicious activity reports to the federal Financial Crimes Enforcement Network in the first half of 2005 was 33 percent higher than in the first six months of 2004, according to a report issued by the Mortgage Asset Research Institute.

Residential real estate loan fraud is a national epidemic, costing communities nationwide an estimated $1 billion in 2005, compared with $429 million in 2004, according to the FBI. Both reports cited conditions in the mortgage industry as factors driving the increase.

“If rising interest rates produce a significant reduction in originations for 2006, additional cases could surface in the future at a rapid rate as some originators press to maintain high origination levels,” the MARI report said.

The MARI report concluded that although 2005 statistics are still preliminary, “it appears that Florida, Utah and Georgia are leading the mortgage fraud pack.” The top five markets showing the most noticeable increase in mortgage fraud are:

1. Alexandria, La.
2. Pascagoula, Miss.
3. Laredo, Texas
4. Morristown, Tenn
5. and Lakeland, Fla.

MARI noted that the number of suspicious activity reports may not be an entirely accurate representation of the amount of mortgage fraud. For one thing, only federally insured financial institutions are required to file such reports.

“We think there is a large number of mortgage fraud situations that are not covered by the statistics we report, based on SARs (suspicious activity reports),” the report quoted an FBI agent as saying.

Also, an increased number of mortgage originators are now submitting such reports, because commercial banks and thrifts, which are required to make such reports, acquired almost 150 independent mortgage banks (which are not) between 1997 and 2005.

Regardless, the MARI report concludes that incidents of fraud have risen. What can you do about it? Always be on the lookout. As you go through the Florida home mortgage loan process, double check all information and ask as many questions as you can.

This question and answer exchange is meant to shed light on an experience no buyer wants to go through: Florida home loan fraud.

Question: I was quoted a three-year fixed mortgage that was not supposed to change for 36 months. I also was quoted a margin of 2.75 percent. The real estate agent changed the rate to a 3 percent margin and the three-year fixed was changed to a monthly rate. This caused me to pay extra interest of $19,949.95 for the first year. Next year will be even more. What can I do?

Answer: Sounds to me like you are victim of abusive lending practices, otherwise known as “predatory lending.” But is it possible that after being told you qualified for the less expensive loan, you agreed at the last minute to the more expensive one because for some reason you no longer qualified for the less expensive one?

Whatever if the case, if what you say is true, the Florida home loan broker changed the terms of your mortgage without your permission or knowledge. But why on earth are you waiting until now - apparently a year after the fact - to complain?

Anyone who believes something’s amiss with their mortgage should begin asking questions right away.

Unfortunately, most of the kind of skullduggery you describe is committed by mortgage brokers, who originate upwards of 60% of today’s home loans. Of course, not all brokers are guilty of this kind of fraud. In fact, most are on the up-and-up and abhor the kind of thing you have experienced. But the few bad actors spoil the basket, which is why many states have either enacted or are trying to enact laws to prevent the miscreants from preying on unsuspecting borrowers.

Victims of this kind of conduct should follow the money. That is, complain to the loan agent’s boss, if he has one. Next, gripe to the funding lender. Brokers don’t actually make Florida home loans. Rather, they do all the paperwork and other tasks, and then take the complete loan package to a lender, which actually supplies the money.

If you still don’t get any satisfaction, determine if the loan has been sold on the secondary mortgage market. If so, take your story to the new lender. I know this sounds like a lot of work, but somewhere along the line, someone may set the matter straight.

Also, take your case to the authorities, both state and federal. Most states license mortgage brokers, and the FBI will go after anyone who is linked to a broad pattern of fraud. The Mortgage Bankers Association has a list of state agencies that oversee the finance sector. Check out the MBA website.

Lastly, I’d like to get back to the hypothesis I posed at the beginning of my response; that is, something might have happened between the time you were approved for financing and the closing.

People tend to think gaining Florida home loan approval is the last hurdle in the footrace to buy a house. But it’s not. Settlement is. And lenders often run a second credit check on applicants a day or two before closing to make sure nothing new has popped up that would change their credit standing. Borrowers who don’t know this - or aren’t warned about it by their Florida home loan brokers - sometimes go out and buy furniture, new cars or other big-ticket items that change their credit scores and push them into a higher-rate mortgage.

If something like that occurred in your case, your loan terms may have changed. But you should have been told, so always keep a sharp eye out and report any questions you may have.

Chalk one up for the good guys.

Ralph Roberts of the Realty Times reports that federal authorities in Texas have arrested Rebecca Hauck, alleged co-conspirator of real estate and mortgage fraud poster boy Matthew Cox.

Cox and Hauck could be called the Bonnie & Clyde of the Florida home loan world… and beyond. A string of dirty deeds that are rumored to stretch from coast to coast have gained them much notoriety. Now, half of the combo is in custody.

According to various news sources and unsealed federal documents, the pair allegedly began its crime spree by committing Florida real estate fraud in the Tampa area in 2003. The St. Petersburg Times and MortgageFraudBlog.com say that Cox started a Tampa-based mortgage company around that time. After he was charged with fraud in Tampa, Cox concocted a plan to use phony IDs and falsified records to make a fortune with fraudulent Florida home loans on broken-down properties.

Later, says MortgageFraudBlog.com, Cox and Hauck moved on to Atlanta, Ga., where they allegedly engaged in a real estate fraud scheme but disappeared before being caught. In 2005, Cox — whose known aliases include Maxwell Price, David R. Freeman, Gerald Scott Cugno, Michael S. Shanahan, Michael J. Eckert, Gary L. Sullivan, and David White — was nearly caught in South Carolina, but again managed to evade authorities and disappear. And not before securing over $1 million in fraudulent mortgage-related loans.

The story gets even more interesting.

According to numerous sources, Cox is rumored to have penned The Associates, a 300-page crime novel detailing the same criminal activities of which he is now accused, before embarking on the spree. The central character in Cox’s novel is a former University of South Florida student who quits his insurance sales job to strike it rich in the Florida home loan business, but finds himself in trouble with the FBI. In a bind, he masterminds an elaborate scheme to defraud lenders of millions before vanishing.

Cox himself is a former University of South Florida student who started his own mortgage company, and has now been charged with fraud in Tampa, while allegedly brainstorming a scheme to evade federal authorities. By his side throughout was accomplice Rebecca Hauck. It will be interesting to see if, upon her arrest, Hauck will reveal enough information about Cox so that he will be tracked down and put out of business for good. Hopefully, for the sake of Florida home loan applicants and businesses, he will be.

There are many reasons to be careful with your Florida home loan. Be wary of the type of mortgage you sign up for - and, as Ronald Poole can attest to, keep your eye on real eestate scams.

The retired Navy serviceman was looking for ways to make a few extra dollars in the hot Florida real estate market.

“You want a better family life,” says Poole.

Poole says he went to several meetings with J.R. Parker, who is being prosecuted for his role in a multi-million dollar real estate fraud scheme.

“It sounded really good. They were pretty good,” says Poole.

There was no money out of pocket. Poole purchased four homes that were appraised way above market value. Steve Watrel is Poole’s attorney.

“They got property that was worthless,” says Watrel.

Watrel says his client believed the appraiser and the mortgage broker and the mortgage lender, all licensed profesisonals … but he was hoodwinked.

“They can’t just say they’re not part of it and walk out,” says Watrel.

There are 140 known victims in Jacksonville housing market, but there could there more. Consider this a lesson for all buyers. With so many experts giving real estate investing advice out there, be careful with who you trust

As predatory lending practics and harmful home loans escalate around the country, is there a demographic most at risk for falling victim to these scams and raw deals? According to a recent study, the answer is YES.

According to, CasaNuevaHouston.com, Latinos are twice as likely as other groups to be targeted this growing wave of real estate. To assist those who are unsure about the mortgage process, the website has posted a Home Buyers Bill of Rights highlighting the most common abuses.

Reaching out to first time, ignorant home buyers

This site was created in Houston due to that city’s large Latino population. It’s also relevent for those seeking a Florida home loan, however, because there are over 2.5 million Hispanics residing in the Sunshine State, over one million in Miami alone.

“Latinos are quick to embrace the American dream of home ownership, because in most Latin American countries, mortgage lending as we know it doesn’t exist,” said Anita Sparks-Bohn, a founder of CasaNuevaHouston.com. “This eagerness creates a wide opening for scam artists, especially when combined with a language barrier and a general lack of understanding about the home-buying process.”

Some of the rights described in the posting take direct aim at preventing common abuses, while others are designed to improve understanding of opportunities available to Latino home buyers who may or may not be U.S. citizens.

For example, many Latino buyers may have the right to purchase a new home in the United States even if they do not have a Social Security number, lack traditional credit, or receive part of their income in cash. Some buyers may also be eligible for programs that provide assistance with down payments and closing costs.

Examples of predatory lending

Examples of predatory lending and other real estate scams described at the Web site include:

• Fictitious fees, including unethical real estate agents charging hundreds or thousands of dollars just to look at homes. In the United States, agents are paid by the seller, not the buyer, and payment occurs only at closing.
• Padding Florida home loans with inflated and unauthorized charges. There have been reports of predatory lenders charging up to 10 points to originate loans, while the standard origination fee is 1 point (or 1 percent of the loan amount.)
• Talking borrowers into unfair, exotic home loans with much higher interest rates, even when they would qualify for a lower rate.
• Selling properties for more than their market value and covering up major structural problems. “Bait and switch” tactics that stick buyers with much higher interest rates, pre-payment penalties and other onerous terms.

Predatory lenders often do everything they can to force buyers to default, so they can resell the property to more victims. Before you take out a Florida home loan, be aware of the risks and scams out there.

After analyzing Home Mortgage Disclosure Act data this week, the Federal Reserve has released findings pertaining to the discrimination of mortgage lenders on racial grounds - an issue numerous sources have brought attention to in recent months. The Fed states that last year, American Indian and Alaska Native borrowers were nearly twice as likely to be overcharged for home purchases, but only half as likely as African-Americans.

According to the Fed’s data, 16.9 percent of American Indians & Alaska Natives received higher-priced, or “unadjusted” lending on home purchases in 2004, compared to just 9.4 percent of whites but a shocking 38.6 percent of blacks. The amounts by which whites and each minority group were overcharged were all roughly the same, however. The study reported that overcharged borrowers averaged mortgage rates 4 to 7.2 percent higher (unadjusted) on their loans than comparable Treasury securities (the instruments used to by the Federal Reserve to price mortgages). The Fed also said that when it factored in borrower-related and borrower-plus-lender-related adjustments, the figures were less drastic.

Compounding the issue is the overall increase in loans to minority groups. Lenders reported $24.9 billion in loans to Native Americans last year, for example, compared to just $14 billion in 2003. Countrywide Home Loans - the nation’s largest lender to American Indians - reported that it boosted Native lending by 50 percent last year, from $2.7 billion to $4.1 billion. The second largest source of loans to Native Americans was Wells Fargo Bank, at $1.3 billion, followed by Bank of America at $1.1 billion and Lehman Brothers Bank at $988 million.

Since the overall mortgage market decreased by a quarter: from $3.9 trillion in 2003 to $2.8 trillion in 2004, this increase is attributed largely to sub-prime lending. Since some sub-prime lenders have been connected to abusive lending, this is a development minority groups may welcome. The alleged discriminatory lending practices of mortgage companies have been criticized by civil rights & consumer advocacy groups, as well as law enforcement officials, in recent months. New York State Attorney General Eliot Spitzer has been suing to continue his investigation of many of the nation’s largest banks, which he claims are in violation of his state’s fair lending laws.

A major player in Southwest Florida’s waterfront real estate market fled the United Kingdom in 2000 after a judge held her accountable in a “dishonest” deal and ordered her to pay $350,000, the Sarasota Herald-Tribune reports. Vicki Mann, known for brokering lucrative condo deals in Sarasota, was then working under the name Victoria Wood and became involved a condo sale that the buyer later claimed was tremendously undervalued.

A High Court civil judge agreed. The sale was ruled improper and Mann was ordered to pay the difference from the plaintiff’s sale and all of the court costs. Shortly thereafter, Mann left the country for Sarasota, where she received her real estate license in 2002 and has become a force ever since. Her deal for Sarasota’s Pier 550 development project is valued at approximately $50 million, and is just one of many forays into Florida condo sales.

Will this jeopardize Mann’s career? Doubtful.

Florida real estate law says that license applicants must be “honest, truthful, trustworthy, and of good character” with “a good reputation for fair dealing.” However, the state’s bylaws also state that while Mann’s conviction could serve as grounds for losing her license, that a “lapse of time and subsequent good conduct or reputation or other reason deemed sufficient” could also be applied.

Mann, who obviously wishes the case would just go away, may get her wish. Her understanding is that a seven-year statute of limitations (which would clear her name in January) applies to the transaction and verdict. Either way, condo developers may be wondering if they judged this book by its cover too quickly. The situation is worth monitoring as the lucrative waterfront development in Sarasota rages on.