Seattle Jury Convicts Mortgage Scam Head Of 30 Felonies; Led Owner Financing Ripoff That Left Unwitting Home Sellers Holding Worthless Notes

From the Office of the U.S. Attorney (Seattle, Washington):

• WILLIAM S. POFF, 37, of Marshall, Michigan, a former resident of Washington State, was convicted [] in U.S. District Court in Seattle of 30 felony counts of conspiracy, bank fraud, wire fraud, and money laundering offenses. POFF is one of five people(1) arrested in June 2009, in connection with a mortgage fraud scheme that cheated banks and property sellers out of more than several million dollars. [...] In all, between 2005 and 2008, the conspirators used straw buyers to purchase and resell properties, obtaining more than 80 loans totaling more than $18 million.

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• The conspirators did not just damage banks and financial institutions. Innocent sellers were harmed when they agreed to loan the buyer a portion of the purchase price [ie. owner financing], to be paid back over time.(2) The sellers did not know that the conspirators had already obtained 100 percent financing from commercial lenders. When payments were not made and properties fell into foreclosure, and then were sold for less than the total of all loans secured by the property, the sellers holding private notes were left with nothing.

For the U.S. Attorney press release, see Former Washington Resident Convicted Of Multiple Counts Of Conspiracy, Bank Fraud, Wire Fraud, And Money Laundering In Mortgage Fraud Scheme (Loan Originator Forged Documents, Defrauded Banks and Sellers in Scheme).

(1) The other four already entered guilty pleas in the case: Humberto A. Reyes-Rodriguez, a/k/a Tony Reyes, 43, of Federal Way, Washington, Alexis Ikilikyan, a/k/a Haikanush Ikilikyan, 30, of Auburn, Washington, Micki S. Thompson, 55, of Tacoma, Washington, and Mario A. Marroquin, 39, of Kent, Washington.

(2) This technique for draining the home equity out from under the unwitting home sellers comes right out of the pages of the old "no money down" real estate acquisition books that have been around for decades. As described in these books, you implement this technique by:

• Finding a seller with a home that is free & clear of any mortgages,
• Convincing the home seller to hold a 2nd mortgage for, say, 40% of the purchase price that will be subordinate to a contemporaneously-obtained 1st mortgage,
• Obtaining the 1st mortgage for, say, 80% of the purchase price.

Since the amount of the 1st mortgage proceeds needed to pay off the home seller equals only 60% of the purchase price (remember, he/she has already agreed to hold a 2nd mortgage for the 40% balance), the excess proceeds from the 1st mortgage, equal to 20% of the purchase price, winds up in the buyer's pocket (less closing costs). The buyer walks out with this 20% in cash, along with the deed to a property that immediately finds itself underwater by 20% (80% 1st mortgage plus 40% seller-held 2nd mortgage = 120% loans-to-value).