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Fla. called No. 1 in mortgage fraud

By Michael Van Sickler, Times Staff Writer
In print: Wednesday, December 3, 2008

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TAMPA — A national report released Tuesday said Florida leads the nation in mortgage fraud. Within the state, Tampa is second in the amount of suspicious loan activity.

As the report was being released, a federal jury in Broward County was returning guilty verdicts in a scam case that included $5-million in fraudulent mortgages.

Howard Gaines, a lawyer who worked as a title agent, was accused of falsifying closing documents.

Gaines has not been charged in connection with any of his work in Hillsborough County, where he processed one-third of the home sales by a Tampa tattoo parlor owner named Sang-Min Kim.

Sonny Kim, as he's known, was profiled in a St. Petersburg Times story Sunday that recounted his flipping of properties, about one-third of which have been foreclosed. The story pointed to some questionable mortgages, including one for $300,000 on a run-down house that now can be had for $35,000.

Gaines has not been charged with any crimes in connection with his work with Kim.

In the Broward case, prosecutors said Gaines, as a title agent, aided his co-conspirators in falsifying closing documents that made it look like borrowers could repay loans. When they didn't repay them, banks such as Wells Fargo, Wachovia and Washington Mutual were left with big losses.

Gaines, 57, was convicted of one count of conspiracy to commit mail and wire fraud and two counts of mail fraud. He is scheduled to be sentenced in February. The maximum sentence is 45 years in prison. His attorney, Stephen Binhak, did not return a call seeking comment.

"I'd like to see him get more prison (time); he's done some bad things," said Doug Pollock, a property crimes expert who testified in the trial after reviewing several sales processed by Gaines' title company. "I think some prosecutor (in Hillsborough) will use this conviction to say, 'I want a piece of him, too.' "

The U.S. attorney in Tampa would not comment specifically on Gaines or Kim.

"I do think (Sunday's Times) story raises some concerns," said U.S. Attorney A. Brian Albritton. "The allegations that were made would fall in the range of something that our office would be interested in."

State authorities also declined to say whether they are investigating Kim or Gaines.

"This is being investigated by the appropriate authorities, but we can't comment further about this case," said Jerri Franz, a spokeswoman for the Florida Department of Financial Services.

Since 2004, Kim has bought and sold about 90 homes in some of Tampa's poorest neighborhoods. Property records show buyers paid Kim $10.7-million for homes he bought for $6.5-million.

Many homes that Kim sold ended up in foreclosure, meaning that many of the same banks that are now getting billions in a federal bailout were left with worthless property.

About half of the sales Gaines handled for Kim ended up in foreclosure when the borrowers defaulted on their mortgages.

Albritton said his office's numbers echo the report published Tuesday by the Mortgage Asset Research Institute in Reston, Va., which put Florida first in the nation in mortgage fraud and Tampa with the second-most cases of suspicious loan activity behind only Miami.

In October, a Clearwater man prosecuted by Albritton's office was sentenced to 10 years in prison and ordered to pay $6.5-million in restitution for mortgage fraud. In June, the office, then under the direction of U.S. Attorney Robert O'Neill, indicted four others in a commercial mortgage fraud scheme.

"Mortgage fraud, in its essence, comes down to lying," Albritton said. "The goal of this office, given the resources that we have, is to find the most significant cases involving those lies."

The FBI said it couldn't comment specifically about Kim or Gaines. "However, we would reassure the public that the FBI views mortgage fraud as a significant and growing crime problem," said Dave Couvertier, a spokesman for the Tampa FBI field office.

"Combating significant fraud in this area is a priority for us."

Staff researcher John Martin contributed to this report. Michael Van Sickler can be reached at (813) 226-3402 or mvansickler@sptimes.com