DA Indicts Conman for Mortgage Fraud

Last December, in an attempt to expose a legal loophole, the New York Daily News filed a fake deed with the office of the city register and “stole” the Empire State Building. The next day the story broke, the building was given back to Empire State Land Associates and the Daily News suffered no legal consequences.

Fernando Maldonado was undoubtedly motivated by goals slightly smaller than New York’s most famous landmark. The 47-year-old con artist posed as the owner of 242 S 2nd Street, a six-story yellow-brick co-op from which he was evicted from in 1992, convinced a man named James Bond to invest $20,000 and applied for a $1.6 mil mortgage.

The scheme unraveled when an attorney with Metro Funding, the mortgage lender Maldonado was soliciting, thought it strange that an individual owned a co-op. When confronted with this suspicion, Maldonado again tried to prove he is the building’s owner with a bogus letter to the Department of Finance.

Metro Funding President David Hecht said that in his 20 years in the industry he has never encountered such blatant lying.

“There are always crooks, maybe someone doesn’t cite a partner,” said Hecht. “But I have never seen anyone so bluntly saying, it’s my property.”

Maldonado allegedly went around the building telling residents he is the owner. Maldonado even managed to convince the Department of Buildings to issue a stop-work order by presenting himself as the owner, claiming that he had not authorized any work on the building.

“Maldonado’s efforts are unusually brazen,” said Brooklyn Assistant District Attorney Richard Farrell. “Nobody has ever tried to steal a several-unit apartment building with all occupied units.”

In February Maldonado was arrested and last week, the Brooklyn DA indicted him, on charges of three counts of Criminal Possession of Forged Instruments and one count of Grand Larceny.

Unfortunately this is just the tip of the iceberg. Although Maldonado is currently out of commission, many other fraudsters are still at large preying on unwitting homeowners and apartment dwellers.

Farrell said that according the FBI, 10 per cent of all mortgages issued in the US are fraudulent. On any given day, about 20,000 are given. If 10 per cent of those are fraudulent, that means that 2,000 fraudulent mortgages are handed out each day. Fannie Mae’s Fraud Finding Statistics from the end of May 2009 placed Brooklyn as number five mortgage fraud hot spot in the nation. Farrell called mortgage fraud the new bank robbery.

The reason for this phenomenon are Brooklyn’s high property values coupled with the economic recession and a loophole in the legal system that does not require clerks to verify information when registering deeds, mortgages and other real-estate transactions–the loophole New York Daily News attempted to expose with the Empire State Building heist.

Although Maldonado’s deed was bogus, it was officially registered. It seemed legitimate enough for Bond to invest, and if the attorney had overlooked the fact that a co-op is owned by a group, perhaps Maldonado may have gotten the mortgage.

To battle the mortgage fraud epidemic Brooklyn District Attorney Charles Hynes created a Mortgage Fraud and Real Estate Crimes Unit in March with $875 thousand secured by Senator Charles E. Schumer. Since its conception, eight fraudsters, including Maldonado, were indicted, and more than 80 cases have been opened.

“This Mortgage Fraud and Real Estate Crimes Unit at the Brooklyn DA’s Office has proved to be the perfect tool to prevent scam artists from preying on Brooklyn residents,” said Schumer. “For years, these criminals have taken advantage of New Yorkers and escaped undetected and unscathed. The Mortgage Fraud and Real Estate Crimes Unit has begun to reverse that trend.”

Unfortunately, it is very unlikely that Bond will ever see his $20,000 again, but Madonado’s indictment means one less con artist on the streets of New York. The eradication of the mortgage fraud epidemic has begun.