Stolen Identities

December 26, 2005

Note: This article appeared in the Chicago Tribune 12/14/05, archives. Because it addresses some very important issues, I posted it to preserve it. Of particular importance is:

Illinois State officials say they want the power to suspend an appraiser's license temporarily and to "fast-track" hearings that would discipline or clear those appraisers. And they hope to introduce criminal sanctions tailored to appraisers who engage in fraud.

My comment to Colorado Appraisal Authorities, and all over the country - this is long over due. How bad does it have to get?

Crooked Appraisers Fuel Scams

By David Jackson
Tribune staff reporter
This story contains corrected material, published Dec. 16, 2005.

A loose network of crooked real estate appraisers is stealing the identities of legitimate colleagues to file false reports and fuel the surge of mortgage fraud in Chicago and across the nation.

The dishonest appraisers have emerged as key players in the multimillion-dollar mortgage crime wave, raising the stakes and obscuring misdeeds.

But even as the caseload mounts, the state agency overseeing about 6,000 appraisers in Illinois has struggled to get hold of the problem. Disciplinary cases have dragged on for years, while many serious infractions go unpunished.

The state Department of Financial and Professional Regulation had just one full-time appraiser investigator until last month, when he retired.

"The system is so broken that it may as well not exist," said Robert Gorman, president of the Illinois chapter of the American Guild of Appraisers and a member of the state's Appraisal Advisory Board.

Mortgage Swindles

Appraisal fraud has only added to the misery of some of Chicago's poorest neighborhoods, where mortgage swindles have left families destitute and buildings locked in a cycle of deterioration.

The first signals of this new breach in the home financing process appeared about two years ago, in the file-lined office where Illinois real estate appraisers apply for licenses.

A few appraisers at first, then in growing numbers, called to complain that their signatures had been forged on home valuation reports.

The complaints mounted as dishonest appraisers trained apprentices and spawned imitators, records and interviews show. Even as investigators began to penetrate the arcane world of the once-quiet profession, swindlers were finding new ways to thwart the system.

Appraisers calculate a building's value by making inspections, researching comparable properties and assessing local market conditions. The profession has earned a reputation for independence and integrity.

But in recent years, as identity thieves capitalized on a red-hot home loan market, dishonest appraisers made the crimes more lucrative, jacking up the value of targeted buildings by misrepresenting conditions or inventing comparable properties.

To help cover their tracks, they filed the reports using legitimate appraisers' names. The forged reports often got little scrutiny from lending firms, as falling interest rates and rising home values fueled a go-go real estate market.

In October 2003, Oak Park-based appraiser Minda Balongag alerted state officials that her name had been forged on a home valuation report.

"I was thinking, they're going to come to my rescue. But that didn't happen," Balongag said. "I don't think they were prepared for this."

Since then, Balongag's signature has been affixed to fake appraisals used to secure an estimated $8 million worth of mortgage loans, state reports and interviews show. Lending firms have blacklisted Balongag, and her once-thriving business is in tatters.

"I spoke to a company last week that received two new appraisals with my license number," Balongag said. "They said we can't tell the real Minda from the fake one."

In the fall of 2003, a spate of forged home valuation reports emerged under the name of another prominent appraiser who specializes in downtown high-rises and large commercial properties.

Those reports bore John Jaeger's forged signature but listed the phone number or post office box of a tiny South Side firm called Market Value Professionals Appraisals and Consulting, or MVP Appraisals, according to state records examined by the Tribune.

MVP's "full-time appraiser/inspector" was convicted drug dealer Jonathan Broadnax, 30, court records show. He has served prison terms for seven felony convictions, including a 2004 aggravated assault. He faced no charges for the alleged forgeries and could not be reached for comment.

MVP's founder, Maya Jordan, 26, has not been charged with any crime, and she could not be located. Her state appraiser's license was revoked in December 2003 after a state investigation concluded that she, Broadnax and a few associates prepared at least 60 fraudulent appraisals used by three swindling crews that secured mortgages worth $20 million.

She denied the allegations. State regulators continue to investigate the role her company played in home finance deals and have referred the case to law-enforcement agencies. Investigators declined to comment.

With other state-regulated professions, from acupuncturists to veterinarians, department officials can temporarily suspend the license of a practitioner who presents a danger to the public.

But no such provision exists for appraisers. As a result, many hold active licenses while facing felony charges or civil lawsuits that offer evidence of fraud, records show. In many cases these allegations go beyond their involvement in the appraisal process.

Walter Jackson, an appraiser in Chicago's south suburbs, was charged with felony theft and forgery last year for allegedly using the identity of a Florida U.S. Air Force sergeant as a false buyer to secure mortgages worth $385,000 on a south suburban home.

Jackson has pleaded not guilty and said through his attorney that he was a victim of the frauds. He holds an active license despite fraud complaints dating to 2002, including a pending complaint that he concocted phony appraisals on two Chicago homes, a charge he denies.

A lending company recently sued Schaumburg appraiser Stavros "Steve" Bourmas, charging that he joined in a scheme to use the identities of dead people to secure home loans. Bourmas denied the allegations, and the case was settled for undisclosed terms.

A state investigation last year concluded that Bourmas submitted reports that inflated the value of five properties in which he had an interest. Bourmas denied wrongdoing, and no action has been taken as a result of those state findings.

Last month, at a state Senate Financial Institutions Committee hearing held in response to a five-part Tribune report on mortgage fraud, state authorities vowed to toughen the regulation of appraisers.

State officials say they want the power to suspend an appraiser's license temporarily and to "fast-track" hearings that would discipline or clear those appraisers. And they hope to introduce criminal sanctions tailored to appraisers who engage in fraud.

Daniel Bluthardt, who two months ago was appointed director of the state's professional regulation division, said he was in the process of hiring another appraisal investigator.

In the meantime, some appraisal investigations may be assigned to the department's two real estate investigators and six examiners, who typically monitor real estate brokers in Illinois (this sentence as published has been corrected in this text).

The department also has faced criticism for not properly screening license applications.

A January report by federal banking monitors concluded that state officials had issued credentials to appraisers without properly documenting their experience and approved correspondence courses without certifying that those classes met federal standards.

That report, by the Appraisal Subcommittee of the Federal Financial Institutions Examination Council, concluded that Illinois had "serious weaknesses" and was "not in substantial compliance" with federal laws.

In March, when the State Office of Internal Audit asked to see the licensing application files of 60 randomly selected appraisers, department officials were unable to produce 10 of those files.

Bluthardt said the department's most pressing challenge is the upswing in forgery cases. Finding those is getting harder, because the criminals appear to be getting savvier, said veteran appraiser Tim McCarthy, who is on the state appraisal licensing advisory board and a federal regulatory panel.

"When this first started a couple of years ago, the crooks would get ahold of one license and beat it to death. But now they're becoming more chameleon-like," McCarthy said. Using a government Internet site and public records, "they've realized they can access an endless supply of licenses, and use each one a few times."

dyjackson@tribune.com

-- end of story

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Mortgage Swindles

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