Lending Tree Lets Data Slip

If being hounded by lenders with questionable motives and expertise isn't enough to steer you away from "Lending Tree" (whom we note has gone the high-profile sports sponsorship route previously tried by Ameriquest, but instead of baseball, with our beloved PGA Tour - excuse us while we puke) how about this:

several former employees" may have shared confidential passwords with "a handful" of lenders that were not approved by the company.

The lenders then used those passwords to access customer information files that contained mortgage request data such as name, address, e-mail address, phone number, Social Security number, income and employment information.

10-1 says these "lenders" or empoyees were selling access to that data.

UPDATE: Sam Glover (of our local Caveat Emptor, riding shotgun over at Consumerist for a couple of days) hoisted this post, along with some correspondence from Lending Tree attorneys who sought the removal of one of the comments.

The backstory:

The attorney, who called twice and emailed three times before noon, requested that we remove the comment by "Lance Moore" below, which contains some interesting and provacative allegations about Lending Tree's business model, among other things.

He first emailed under the cover of "please remove the non-public URL, this guy is encouraging hackers." Then, when we redacted that url, the attorney followed up right away stating that the comment contained numerous "defamatory" comments and again requested that the comment be removed. 

The attorney walked the line pretty carefully, and did not make any explicit threats, but here's the thing:  Any time we get an email from a corporate attorney tossing around jargon like "defamatory" and using interrogative sentences like: "Are you refusing to remove this?" we consider that a veiled, if unspoken, threat of legal action.

After all, if they really wanted the whole comment removed, why didn't they just ask for that in the first place?  That was what struck us as odd, and might mean their motives were not confined to angst over a hackable public url leading to a lender login page.  Maybe related to this? from Sam at Consumerist:

a class-action lawsuit in 2006 alleged just that: banks were not really competing, just LendingTree employees. As far as I can tell, the lawsuit is ongoing.

April 21, 2008

Dear LendingTree Customer:

We want you to know that some loan request forms our customers sent to LendingTree may have been seen by lenders without our consent. These lenders then used the forms to market their own mortgage loans to our customers. While we don't believe that the forms were used for any other purpose, we want you to know what happened and what we did to correct this situation, as well as what you can do to monitor your credit records.

What Happened and What We Did

Recently, LendingTree learned that several former employees may have helped a handful of mortgage lenders gain access to LendingTree's customer information by sharing confidential passwords with the lenders. When we learned of this situation, we quickly contacted the authorities, and LendingTree is helping with their investigation. We promptly made several system security changes. We also brought lawsuits against those involved.

Based on our investigation, we understand that these mortgage lenders used the passwords to access LendingTree's customer loan request forms, normally available only to LendingTree-approved lenders, to market loans to those customers. The loan request forms contained data such as name, address, email address, telephone number, Social Security number, income and employment information. We believe these lenders accessed LendingTree's loan request forms between October 2006 and early 2008.

What You Can Do

Again, we don't believe any identity theft or fraudulent financial activity resulted from this situation. However, we suggest you get a free credit report. Look for any accounts you didn't open and/or inquiries from creditors that you didn't initiate. If you see anything you don't understand, contact the credit bureau. If you see anything suspicious, you may want to file a fraud alert with the bureaus. For more information on how to do this, please refer to LendingTree's Guide to Protecting Your Credit and Identity.

Where to Get More Information

We regret any inconvenience and apologize for any unwanted mortgage calls you may have received. For more information about this situation, and for more information on what you can do, please refer to the attached Questions & Answers .

Sincerely,

R.L. Harris

04/22/08 at 11:09 AM Permalink | Comments (10) | TrackBack (0)
Filed Under: Consumer Protection, Rip-Offs

Otsego Frauds: City Pages Ads Some Color

City Pages Feature Story ads some color to the mortgage/real estate fraud ring in Otsego:

There were a dozen separate applications submitted on Clewette's behalf. She saw only one of them. There were two requests per property—for a first and second mortgage, a not-uncommon practice in the market at the time—totaling nearly $2 million. On every one of Clewette's loan applications, the box next to "primary residence" is checked and the box next to "investment property" is blank. Her reported income was more than triple her actual income of $27,000, and she was asked to sign only one of the 12 applications. On most of them, in the space reserved for the "interviewer" who filled out the form, the American Wholesale employee who signed was either the imprisoned John Searle or the disappeared Brian Matheson Sr.

Meanwhile, one of the alleged crooks, unwinds the remnants of a high life built on other people's money, lies, and who knows what else:

Flavin's yacht, the Nothin' but Trouble, is up for sale on Craigslist. The party bus is up there, too ("Have your own rolling money maker"). His half-million-dollar Maple Grove estate is for rent, and his Minnetonka office suite—the one Owens raided in December—is totally cleared out.

Nothing But Trouble [City Pages]

02/16/08 at 12:31 PM Permalink | Comments (4) | TrackBack (0)
Filed Under: Fraud, Northern 'Burbs, Rip-Offs

Another One: Otsego Gets the Frauds

You have not made it as a distant suburb until a mortgage fraud ring gets busted:

An alleged mortgage fraud case involving perhaps as many as 130 homes -- mainly in one Otsego development -- with mortgages totaling more than $40 million.

It's always the same sales pitch:

The two firms ran newspaper ads promising $25,000 to $30,000 to investors with no up-front costs as long as their credit score was above 680...All investors had to do was apply to buy multiple properties.

The firm promises to cover all the messy details, like finding rent-to-own tenants, managing the properties, and selling them to the renters in two years, at which point the profits would be split.

Of course, none of that happens.  The firm pockets the cash.  The investors wind up with multiple mortgages in foreclosure, shredded credit, and their name in the paper.  The renters are on the street trying to start over.  The lenders are out millions on the fraudulent loans.  The neigborhood gets pocked with foreclosures and values tank. 

When it is all said and done, the alleged perpetrators might get four years.  The impacted people and neighborhood will be lucky to recover in as much time.
Victims of Investment in Otsego [Strib]

02/14/08 at 04:27 PM Permalink | Comments (5) | TrackBack (0)
Filed Under: Fraud, Northern 'Burbs, Rip-Offs, Twin Cities

Our Sentiments Exactly

Well Said, Consumerist (from whom we clipped the graphic above)

[Back before sub-prime meltdown became kitchen table conversation, Ameriquest was the first (and probably worst) sub-prime lender to implode (with the help of a $325 million dollar class action suit), though they maintained a skeletal operation until a month ago.]
Ameriquest is Dead [Consumerist]

09/11/07 at 03:59 PM Permalink | Comments (0) | TrackBack (0)
Filed Under: Fraud, Industry News, Rip-Offs, Sub-Prime

Alleged Fraud for Profit Mortgage Scheme in Southern Metro

Fresh evidence from the Star-Tribune today that we have a much larger fraud-for-profit mortgage problem in the Twin Cities than many care to imagine.

Authorities revealed in federal court Wednesday that they are investigating allegations of a mortgage fraud conspiracy involving about 200 houses in several southern Twin Cities suburbs...The government estimates losses of more than $50 million.

To this point, the standard media script on mortgage fraud has mostly centered around individual homeowners who were preyed upon by unscrupulous lenders, put into homes or mortgages they had no hope of ever repaying, and had their lives turned upside down by the experience.

Though these stories pass for decent journalism in a "little guy screwed by the big guy" sort of way, and have gotten plenty of attention in the press and from the legislature, we've felt for a while that they are just the tip of the iceberg, and that the bulk of mortgage and real estate fraud in the Twin Cities has been perpetrated by organized groups of individual "property investors" tied to all aspects of a real estate transaction.

We fully expect to see more operations of this sort exposed in the coming months.
Alleged Mortgage Conspiracy Led to $50 Million in Losses [Strib]
From Bought to Rented to Foreclosed [Strib]

09/06/07 at 10:08 AM Permalink | Comments (3) | TrackBack (0)
Filed Under: Consumer Protection, Foreclosures, Fraud, Industry News, Rip-Offs, Twin Cities

Blind Item Recap: Connecting the Dots, Meet Adam Lafavre

Regular readers will remember this little blind item we published a few months ago:

What prominent, high rolling (love those rims baby!) Lake Minnetonka dwelling (whose domicile is/was actually owned by another prominent Minnesota business-person) real estate agent was recently visited by the FBI Federal Regulators.

Though there were some errors of fact in this original (hence the blind part - like we have staff to research facts, of all things) posting of what was at that time little more than rumor, we can confirm that our blind item referred to the same guy who happened to grace the front page of the Strib on Sunday. 

Meet one Adam Lafavre.  [Disclaimer: He may or may not have made the paper due to some nudging on our part of a particular reporter over at the Strib]:

For years, Adam LaFavre cultivated an image as a successful real estate dealmaker and a man of faith. He drove luxury cars, wore a Rolex watch and owned a $7.5 million mansion on Lake Minnetonka in Wayzata...The IRS' criminal investigation division alleges that he helped raise money for an illegal investment scheme that promised high monthly returns in offshore banking programs at no risk.

Great work by Reporter Chris Serres, who mentions that his phone has been literally ringing off the hook since publication, and has been taking calls from dozens of people who were allegedly defruaded by Mr. Lafavre, or, have been caught in some other type of real estate fraud and are looking for answers and help.
Cloud of Fraud Hangs Over Investor [Strib]

09/04/07 at 03:26 PM Permalink | Comments (0) | TrackBack (0)
Filed Under: Blind Item, Consumer Protection, Fraud, Industry News, Real Estate Law, Rip-Offs, Twin Cities

From the NYT: Inside the Countrywide Lending Spree

Any consumer with a functioning BS detector who has seen (over, and over, and over again) number one mortgage lender Countrywide's televised ads - you know the ones, with a smarmy, guy next door spokesmodel, pitching everything from option ARMS to debt-consolidation Home Equity Loans - probably recognized that there was more at work there than simple "we're here to help" salesmanship.

Case in point, this piece from Sunday's New York Times, on Countrywide's unseemly sales practices, which exposes a corporate culture built around separating its customers from as much of their money as possible:

“I want to be sure you are getting the best loan possible,” the sales representatives would say.

But providing “the best loan possible” to customers wasn’t always the bank’s main goal, say some former employees.  Instead, potential borrowers were often led to high-cost and sometimes unfavorable loans ...Countrywide’s entire operation, from its computer system to its incentive pay structure and financing arrangements, is intended to wring maximum profits out of the mortgage lending boom no matter what it costs borrowers...

Now, without begrudging any organization fair profit from its toils (I think we are all adult enough to comprehend that the mortgage business, or any other, is not a public charity,) Countrywide does appear to have set up an organization devoted to deliberately, systematically, and professionally screwing its customers, rather than providing a fair exchange of goods and services.  Borrowing from their Slogan:  Nobody Can do What Countrywide Can.
Inside the Countrywide Lending Spree [NYT]
Photo: Bloomberg

08/27/07 at 09:27 AM Permalink | Comments (2) | TrackBack (0)
Filed Under: Consumer Protection, Financing Options, First Time Buyer, Industry News, Personal Finance, Rip-Offs

If Your Landlord is a Deadbeat, You Might be Really, Really Screwed

Interesting bit from MPR this morning on how foreclosures are hitting renters.  Long story short - you can be the worlds best renter, but if you rent from a deadbeat, you may find yourself with no utilities (or on the street) when your landlord defaults.

Some landords are even drawing up leases for properties already in foreclosure or serious default, hoping to extract the last bit of cash from unwitting tenants before the inevitable:

...many renters moved into a place unaware it was already in foreclosure at the time they signed their lease. "I would say at least half the people have looked at me completely astonished and said, 'I didn't know this had happened. I wouldn't have rented from this person.'

And there are a lot of investors/landlords in foreclosure:

In Ramsey County last year, investor properties accounted for 43 percent of foreclosed mortgages. In Hennepin County officials estimate the number at about 47 percent for the first three months of this year.

So what's an honest renter to do?   A little due diligence:  Hennepin County lists all sherriff's foreclosures online; so before signing a lease, check both the property address and the landord/property owner by name to see if there has been any foreclosure activity.  Might also be a good idea to check the Hennepin county tax information page to confirm that you are in fact dealing with the owner.
· Hennepin County Sherriff's Foreclosure Search by Name/Address [.gov]
· Hennepin County Property Tax Information Search [.gov]

· Renters Put Out by Foreclosures [MPR]

05/11/07 at 08:21 AM Permalink | Comments (1) | TrackBack (0)
Filed Under: Industry News, Minneapolis, Rip-Offs, Twin Cities

Despite Concern, Lenders Still Pushing Option ARMS

Lenders Like Quicken Still Aggressively Pitching Option ARMS

As the ad posted above played on CNBC this AM, we thought to ourselves, "Self, I can't believe these guys are pitching option-ARMS this way.  Talk about stupid."  Then, as if on cue, we see a piece in today's Real Estate Journal that points to growing concerns about the the option ARM market.

Investors aren't panicking over option ARMs, but they are signaling greater concern about how well borrowers will cope with the eventual jumps in payments that many face...[snip]...For some borrowers, option ARMs are ticking time bombs.

These loans, in our view, are suitable for a only very small slice of the borrowing public; specifically, those of very high credit quality with high net worth, who use it as a tool to manage cash flow. An option-ARM should NEVER be used simply to be able to afford a mortgage that under normal circumstances would be out of reach; that is just stupid and asking for disaster.

The problem is, many lenders continue to offer sell aggressively pitch these loans as a magical affordability solution.  Look how low your payment can be! You can save thousands!

We are calling BS, think the practice is reprehensible, and Quicken (which holds itself out as a purveyor of sound personal finance solutions) ought to know better. Secure advantage? Yeah, right.
· Option Arms Emerge as Home-Loan Worry [REJournal]

04/19/07 at 12:42 PM Permalink | Comments (2) | TrackBack (1)
Filed Under: Financing Options, Industry News, Interest Rates, National & Abroad, Personal Finance, Rip-Offs

More Great News: Twin Cities Have 10th Highest Instance of Mortgage Fraud

At the risk if turning this space into a mortgage and real estate fraud blog, we point you to another example of how ugly the underbelly of the real estate and lending business actually is, courtesy of the Star Tribune's Jackie Crosby and Jim Buchta.

This time, it's not one or two crooked realtors/lenders out to screw one individual, but a group that created a process to systematically defraud lenders and funnel millions of dollars in illegal payments to buyers, sellers, brokers, title companies, and more.  They did this by inflating sales prices and creating sham companies (among other fraudulent tactics) to launder the dough and pass it back to the participants.

All the details are in the article, and also in a related DOJ economic crimes press release, but here's the snippet from the article that absolutely floored us:

In 2005-2006, the Twin Cities had the 10th-highest incidence of loan fraud nationwide for loans delivered to Fannie Mae, the government-sponsored mortgage company that finances one of every five U.S. home loans. The most common scams involved misrepresenting borrowers' identities or credit histories.

The problem, apparently, goes well beyond just the sub-prime market. For those wondering why foreclosure rates are climbing, it is not because prices or interest rates are rising - it is fraud. We say: LOCK THEM ALL UP.
· Mortgage Scam Nets 3 Million [startribune.com]
· DOJ Economic Crimes Press Release [usdoj.gov]

02/13/07 at 12:44 PM Permalink | Comments (1) | TrackBack (0)
Filed Under: Fraud, Market Stats, Rip-Offs, Twin Cities