Oklahoma lenders fight mortgage fraud with routine background checks

Mortgage loan servicing companies and investors on the secondary mortgage market demand and get more and broader scrutiny by lenders of all players in home sale transactions.
by Richard Mize Published: September 2, 2011
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Another mortgage fraud case from the housing boom worked through federal court this week when a Midwest City man was sentenced to federal prison for conspiracy to commit wire fraud in two home sales.

The transactions were in 2006 and 2007. With the boom long over, such cases could be fewer and farther between because of safeguards lenders have put in place at the insistence of third-party loan-servicing companies and investors who buy home loans on the secondary market, said Betty Shaw, president of the Oklahoma Mortgage Bankers Association.

False high prices

In this week's case, U.S. District Judge Timothy D. DeGiusti sentenced Derrick Reuben Smith, 47, to 40 months in federal prison, then two years of supervised release, and ordered him to pay almost $370,000 in restitution. A jury convicted him in April.

Prosecutors said Smith conspired with two others to induce lenders to fund mortgages for the purchase of two new houses, based on falsely inflated prices, in Raintree Acres addition, south of Memorial Road and east of Air Depot Boulevard. He also misrepresented loan proceeds that he pocketed as commissions and bonuses paid to T&T Realty, owned by Trina Tahir.

The houses eventually went into foreclosure and later sold for $100,000 less than the loans Smith helped arrange, prosecutors said. Michael Gipson pleaded guilty to conspiracy and money laundering in the case. Tahir pleaded guilty to money laundering in another case.

Gipson and Tahir, to be sentenced in coming weeks, face up to 20 years in prison, a fine of $500,000 and restitution.

Broader scrutiny

Now, all players in a mortgage transaction are scrutinized in ways they weren't five years ago, from the real estate agents to the appraiser to the escrow specialist at the title company and everyone else, said Shaw, senior vice president and mortgage operations manager for SpiritBank.

“They check everything. All the parties interested or participating in the transaction are checked,” Shaw said.

Lenders had done some background checks themselves before the boom and bust, she said, mainly because the Federal Housing Administration required it for loans it guaranteed. But now all loans are scrutinized up front. SpiritBank just this year farmed out loan risk mitigation to Agoura Hills, Calif.-based Interthinx and its FraudGUARD service, she said.

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by Richard Mize
Real Estate Editor
Real estate editor Richard Mize has edited The Oklahoman's weekly residential real estate section and covered housing, commercial real estate, construction, development, finance and related business since 1999. From 1989 to 1999, he worked...
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