Mortgage Fraud & the Illegal Property Flipping Scheme: A Case Study of United States v. Quintero-Lopez

by Alexis C. Bell

Abstract Mortgage fraud has been described as “a form of bank robbery where the bank is not even aware it has been robbed until months or years later.” Within the United States, an estimated $14 billion (0.66% of all loans) in fraudulent loans were originated in 2009 alone. In United States v. Quintero-Lopez, 15 defendants were indicted on 70 counts in the Southern District of Florida for a mortgage fraud scheme involving 16 fraudulent loans totaling $6 million in disbursements. This case study examines over 3 ½ years of activity, incorporates a detailed risk assessment and highlights best practices for prevention, detection, and investigation. The methodology of the scheme is detailed in a process flowchart, link analysis, and timeline of events. mortgage, fraud, loan, risk assessment, investigation, economic crime Table of Contents Introduction 6 Case Summary 9 Illegal Property Flipping Scheme 11 Description 11 Methodology 11 Facts of the Case 14 Risk Assessment 27 Indicators 27 Cause 27 Industry Risk 28 Geographic Risk 30 Fraud Risk Exposure 31 Operational Risk 31 Financial Reporting Risk 34 Compliance Risk 38 Best Practices 39 Fraud Prevention 39 Fraud Detection 44 Fraud Investigation 49 Analyst’s Notebook 51 References 52 Appendix A Mortgage Fraud Schemes as per the Federal Bureau of 2009 Financial Crimes Report and the 2009 Mortgage Fraud Report 57 Appendix B Process Flowchart for United States v Quintero-Lopez (2007) 66 Appendix C Link Analysis for United States v Quintero-Lopez (2007) 83 Appendix D Timeline Chart of Houses 1(a) through 4(d) for United States v Quintero- Lopez (2007) 114 Appendix E Timeline Chart of Houses 5(e) through 8(h) for United States v Quintero-Lopez (2007) 125

128 pages, Paperback

First published December 4, 2010