ON MAY 2, 2007, Marina Bakhmet secured a loan to buy a $1.2 million, 8,000-square-foot plot of land in Medina with the help of her loan officer, Camie Byron. Even at the height of the real estate market it was a lofty loan (the previous owner had purchased the property six months earlier for $775,000). But Taylor, Bean and Whitaker Mortgage Corporation approved it based on Bakhmet’s loan application, which stated that she worked at a local design firm and had more than $850,000 in assets. The one tiny detail that the lender overlooked? Bakhmet actually grossed less than $20,000 a year as a house cleaner and had minimal assets.
In December, Byron and four associates—most of whom were Bellevue-based real estate industry professionals—will be sentenced for their parts in the largest mortgage fraud case in Washington state history. The $46 million scheme spanned three years, involved nearly 70 bogus transactions, and netted its architects more than $9 million. The final two defendants in the case will be sentenced in January, and all seven face as many as five years in prison and a $250,000 fine.
The perps couldn’t carry out the plan alone, though. In many cases, they paid people with stellar credit for their identities and—aided by lax lending standards that didn’t require proof of earnings—inflated their financial history on loan applications to purchase pricey pads in tony neighborhoods. The so-called “straw buyers” were told they wouldn’t have to make payments because the homes would be quickly flipped for big profits.
A word to the real estate wise: Straw buying, even when done with good intent, is often illegal. “Let’s say you’ve got a son who wants to buy a house,” says Amanda Lee, a criminal defense attorney with Schroeter Goldmark and Bender. “You might say, ‘We’ll do this in my name and with my credit, but you’re going to make the payments.’ If the lender asks if you’re going to live there and you say yes, that’s potentially a fraudulent transaction.”
As egregious as some of the straw purchases in the Bellevue scheme were, the feds aren’t just interested in the little fraudulent fish (many of whom have already been punished with credit-crippling foreclosures). According to Jim Oesterle, one of the assistant U.S. attorneys who prosecuted the case, they’re also moving up the purchase-and-sale food chain to the lenders who serviced the loans.
And that’s just fine with Peter Camiel, an attorney who defended a client convicted of orchestrating a similar straw-buying scheme last February. “There was no due diligence done, and the people coming in with these loan applications knew that,” he says. “They couldn’t have done this without gross negligence or complicity on the part of the lending institutions.”