http://www.fbi.gov/dallas/press-releases/2014/collin-county-man-guilty-of-mail-fraud
http://crimeblog.dallasnews.com/tag/marcus-brian-curry/
Local investor whom I met in the past pleads guilty to mail fraud. He took over deeds, owner financed to new buyers and collected payments in a po box he controlled and the FBI arrested him and charged him with mail fraud.
All I can say is wow, what do the gurus say about this ?
Mail fraud? How about just plain old ‘fraud?’
This is a gross violation of the trust of everyone involved.
For a couple of decades the FHA was enabling scams like this.
They offered non-qualifying assumable mortgages, where the original borrowers/sellers remained on the hook for the history of repayments for several years after the assumption of the loan. An assumption didn’t mean removing the seller from liability.
Who knew? I mean, who knew this?
The FHA never made this clear to the original borrowers (sellers). It was “sold” by the FHA as an easier way to sell when the time came, which it did accomplish (The objective being to help ‘average’ Americans buy homes. Where have we heard this before?).
Meanwhile again, most sellers didn’t realize they were still on the hook even after a new buyer took over their non-qualifying, assumable, FHA loan. And when a new buyer made late payments, it showed up on the original borrower’s credit (for a period of time).
Worse, if a new buyer defaulted, the original borrower “could” end up with a foreclosure on his credit, and ostensibly get sued for a deficiency judgement, although the latter has never happened, as far as I know.
Meantime, this Texas jackass gives regulators ammunition to over-regulate the legitimate sub2 investor/financiers.
The fact that this went on since 2006 is a surprise. How many sellers does someone need to screw, before you prosecute them?
This should serve as an example of why legitimate sub2 flippers won’t take over financing that isn’t reasonably easy to service. That is, reasonably easy to sell.
There’s more details to this story, but it sounds similar to the Texas mortgage assignment scam we talked about back in 2011/12. Different strategy. Different scam artist. Same effect.
Meantime, the prosecutors probably could ONLY get him on mail fraud, because what the investor did, could be defended as genuine ‘incompetence,’ rather than criminal intent to “defraud” a bunch of people.
I’m betting the prosecutors probably had to wade through several case scenarios to find one where they could prove intent to defraud. I mean many things can go bad in deals like this, but most would be attributed to bad business decisions, rather than outright intent to steal money.
As far as operating out of a P.O. Box is concerned, this is just an opportunity/mechanism for prosecution. Otherwise, there’s nothing illegal, or unethical about having buyers and sellers mail payments and correspondence to a P.O. box.
It’s just supremely stupid for them to do that, for a variety of business reasons.
There are a few subject to courses that teach kitchen table closings, po boxes, bypassing mortgage cos…etc. What ever the reasoning I think the FBI sees the law differently than what some gurus teach about subject to. At least here in Texas
Just saw this update, WOW…12.5 years in the FED for subject to investing:
http://www.justice.gov/usao-edtx/pr/collin-county-man-sentenced-151-months-multimillion-dollar
On second thought after reading this, it looks like a combination of Subject TO & greed. He stopped paying or never paid some mortgages.
No. It was NOT “12.5 in the FED for 'sub2 investing.” It was 12.5 years in the FED for for ripping sellers off by not actually following through on the agreed terms of the ‘sub2’ transaction. There’s a BIG difference.
Taking title ‘sub2’ is not illegal. Taking title and screwing the seller’s credit for gain IS.
After further investigation and speaking with others who knew the investor that was arrested told me he was very successful starting out and became full time in a short amount of time at a young age. However, when the market went belly up the owner financed buyers he put in the homes defaulted on multiple properties he took subject to. Since real estate was his only source of income he wasn’t able to able to keep up with the payments, foreclosures, etc…Therefore, leaving the sellers credit tarnished and he had a lot of these deals go bad with the banks. Once several loans with the same bank went into default they discovered the titles had changed and began to call the loans due. This action made the bank look closer and pointed to his company as having been making payments and on the titles. As a result they turned it over to the FEDS and as you stated they only charged him mail fraud. However, he went along with it and plead guilty and got 12.5 years having no money left to hire a good lawyer to defend himself. So in the end it could of been greed but most likely the down turn in the market exposed him and the subject to strategies he was using leaving him without a pot to piss in because he was in over his head and couldn’t get out. I think the latter because at one point he had a successful business with a lot of seller / buyer testimonials on video and audio on his web site and had a good BBB rating which most investors don’t participate in. Like I said this is a person I met and spoke with before and I know he started out with the guru’s subject to courses and was a local REIA person. I hadn’t heard or talked with him in several years so it was shocker when I read the news in the paper.
Well, that IS the downside of making promises you can’t keep.
That downside is also one of the primary motivations for ‘mortgage assigning’ where the investor puts buyers and sellers directly together, and walks with an assignment fee. If the buyers default, the investor has no liability, and the sellers get to foreclose, or ‘something.’
The issue then, of course, is the that sellers rarely know how to overcome default situations, short of covering the payments, and/or foreclosing, and/or absorbing credit catastrophes.
In this case, it might as well be a mortgage assignment situation, since the investor didn’t know how to handle this level of a default threat. Not many would.
This would be a situation, where it would be wiser to start conversations with everyone involved, and begin negotiating solutions. It doesn’t make any difference if a solution was found, or not, but the appearance of finding one, and the work involved in finding one, and the paper trail of finding one, would have really built some insulation around this investor, and served as a hedge against charges of fraud. Otherwise, what fraudster is gonna work that hard to unwind a “problem?” Not many. "Jaw, jaw, jaw, is better than war, war, war (pronounced wah), as Churchill once admonished.
Meantime, the idea of putting two amateurs together and letting them fight it out is completely irresponsible, if not unethical, despite the willingness of all the parties to join in on the scheme.
Evidently, our Texas sub2 investor had a crappy attorney.
The issue is, whether the seller is informed of the risk and relief available to him, or not. Same goes for a buyer, in the event a bank calls a loan due.
It makes sense the prosecutor couldn’t ‘get him’ on the merits of the facts, but had to go ghetto on ‘mail fraud.’
“Mail fraud” is like the universal ‘catch-all’ count, when a prosecutor doesn’t have a good case.
There’s a lot of bluffing going on with these prosecutors, and a ‘mail fraud’ count, tells me they’re hanging by a thread. I would’ve gambled and gone to court, and let a judge weigh what happened, before I copped a ‘mail fraud’ plea. 12.5 years? Pffft. Now I feel sorry for this guy.
That’s of course, not knowing any more.
Be sure your sub2 paperwork clearly states that there is an underlying note, and that the new buyers understand this is part of the S2 process. We all know purchasing a property S2 is not illegal, but not doing everything all out in the open with 100% transparency can be seen as fraud.
Hi,
This is a great reason to use an escrow / title servicing account to make payments to and ensure the underlying payment is made!
GR