Loan Fraud

Kathy Moore's loan application sailed through the mortgage desk at Lehman Bros. Bank, and little wonder. With sterling credit, deep pockets and two appraisals pegging the value of the Benedict Canyon house she wanted to buy at $2.5 million, she seemed a perfect fit for a $1.47-million loan. Had the bankers taken a closer look, they might have discovered that the home was worth just $775,000 and that Moore's borrowing power existed only on paper.

Capping an elaborate sting, federal officials said Wednesday that they had charged 23 people with operating a Southland-based equipment-leasing scam that generated at least $20 million in losses at some of the nation's biggest financial institutions. The scheme involved phony invoices and other fraudulent methods used to get funds from Citigroup Inc., Wells Fargo & Co., GE Capital, Bank of America Corp. and other lenders.

Consumers seeking home loans need to be vigilant against scam artists, especially now that U.S. banks are tightening lending standards for nontraditional and sub-prime home mortgages, making loans harder to come by. The FBI recommends the following to avoid mortgage fraud: * Get referrals for mortgage professionals, and check their licenses with state, county or city regulatory agencies. * Be wary of unsolicited contacts and high-pressure sales techniques.

Two high-profile Beverly Hills real estate agents and two licensed appraisers were indicted Thursday on charges of joining in a sophisticated scheme that lenders said cost them more than $40 million in fraudulent loans for homes in some of Southern California's most expensive neighborhoods.

The U.S. Supreme Court on Monday rebuffed entreaties from the University of Phoenix to throw out a massive suit charging the nation's largest accredited private university with defrauding the government of millions of dollars in federal education loan funds.

ABN Amro Mortgage Group Inc. has agreed to a $41-million settlement with the federal government for falsifying documents in tens of thousands of loans insured by the Federal Housing Administration, the Department of Housing and Urban Development said. In 2003, the department discovered underwriting deficiencies and improper conduct by an ABN employee.

Concerned about rising mortgage fraud, state regulators are developing plans to create a national registry that would show enforcement actions against lending industry insiders. The database is expected to include disciplinary actions and license revocations imposed on industry workers including mortgage brokers, finance company loan officers and appraisers. The need for the registry, experts say, is being driven largely by the rapid expansion of independent mortgage brokers.

Prosecutors said the scam worked like this: The suspects located homeowners whose loans were in default and persuaded them that they could avoid foreclosure with a short-term loan to cover their debts. The victims were told that their homes would be refinanced by "co-signers" with good credit.

A former envoy for Afghanistan's deposed Taliban leadership who pleaded guilty to cheating on his taxes and lying on a bank loan application has been sentenced to two months behind bars. Noorullah Zadran, once a top spokesman for the Taliban in the United States, pleaded guilty June 17 to federal charges in U.S. District Court in Manhattan. Zadran also was fined $5,000 on Tuesday and ordered to serve three years of supervised release, the Justice Department said.

Idanel Bonaparte's credit record had a few dings when she borrowed $108,000 from Ameriquest Mortgage Co. last year to fix up her aging home. The divorced nurse had an offsetting advantage, though: a mutual fund account worth $25,456.53. Linda Hubbard, a widow working three jobs, refinanced her home with a $211,000 loan from Ameriquest a month after Bonaparte.