Twenty five professionals in the mortgage, banking and even the legal fields were charged this week with

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mortgage fraud.  At stake is over $100 million dollars in stolen money.  The AFG Financial Group, based out of Manhattan, is responsible for finding gullible buyers with excellent credit ratings and then pairing these buyers with distressed properties while telling the buyer it was good for the community and guaranteeing a high return on their investment.  The group approached other lenders and banks to sell the mortgage to, all the while keeping all the funds associated with the successful closing of the loan for their own personal use.

Some of these properties were nothing but vacant lots.  By bringing in unethical appraisers to “appraise” the phantom houses, they were able to get incredibly high values on nothing more than weeded lots, which, of course, validated the loan amounts.  One Manhattan District Attorney, Robert Morgenthau, said “This kind of activity is what led to the mortgage crisis.”  It’s being called the largest mortgage fraud ever in New York City.

Turns out, these buyers weren’t even required to be employed, so long as their credit was good.  During the investigation, W-2s, bank statements and other documents along with fake paychecks were forged and submitted to the lenders and even some banks that weren’t in on the fraudulent activity.  An excellent financial report, high credit ratings and appraisals for houses that didn’t exist was the formula that allowed these millions to be swindled over a several year period.

Now the buyers, who thought they were agreeing to a community improvement project are now looking at bad credit, foreclosures and federal investigators down their throats.  In a few cases, some buyers are doubly betrayed since the fraudsters would often retain second mortgages in a not-as-strict sub-prime market without the buyer’s knowledge.

The defendants, who were arraigned on Wednesday, were charged with enterprise corruption and each is facing twenty-plus years in prison if they’re found guilty.