Update 1/11/09: More proof fraud probably occurred: Market analysis of all homes sold on Petit Bois over the last few years
It seems there is more to the Linda Harmon story than what was posted Thursday. A Jackson Jambalaya investigation reveals mortgage fraud probably took place when Ms. Harmon's Jackson, MS home was sold in 2006. (Yes, you regular readers just knew I was going to go there at some point). Ms. Harmon's former home was sold on December 7, 2006 to a Tracy Williams and Tracey Michelle Goins for $900,000. The loan was provided by WMC, a well-known subprime lender no longer in business) through 80/20 1st and 2nd mortgages. ( 1st Mortgage Deed of Trust & 2nd Mortgage Deed of Trust).
The first mortgage was for $720,000 and contained riders for both a balloon provision and adjustable rate. It was amortized as a forty-year mortgage (due in full in 2037) with an interest rate fixed for two years at 7.5% and would "adjust" every six months after the fixed rate period expired. The second mortgage was for $180,000 with a 25-year term with an undisclosed interest rate.
Here is where it gets weird. The house was foreclosed on exactly a year ago and was sold on September 12, 2008 for $373,500 to Litton Loan Servicing (It is now owned by Arch Bay Holding, a Miami, Fl. firm). Sources have told JJ the house will soon be put up for sale with a listing price of less than $400,000 (which would conform with recent sales of similar homes in that subdivision).
There are several facts about this transaction and the property's history that are suspicious in nature. The house is in a neighborhood where similar homes are approximately $400,000. (Listing of homes on same street and assessed values. Disclaimer: assessed values usually are below the fair market value of the home and don't jump up to $900,000 within a few years). Ms. Harmon built the house nearly ten years ago. (It sits on the River Hills Country Club tennis courts). The house was listed by Ms. Harmon several times with different Realtors in 2005 and 2006. It was withdrawn by Ms. Harmon each time. It was not listed by Ms. Harmon with an agent when she sold the home.
When Ms. Harmon sold her home, her mortgage was with WMC, the same lender who financed the sale on December 7, 2006. The people who bought the home were not residents of Mississippi. The transaction was closed by a notary public in Shelby County, Tennessee (Memphis).
So a house was sold which suddenly doubled in value compared to the homes in its subdivision, a subprime mortgage lender was used for 100% financing, the buyers were out-of-state, the closing took place in Tennessee, the house went into foreclosure soon after the sale, and the auction price was barely above a third of the original sales price. However, there are even more facts about this transaction and Ms. Harmon that show mortgage fraud "probably" took place.
In the post Thursday, JJ reported several hundred thousand dollars in liens and judgements were filed against Ms. Harmon by various creditors. Several liens were filed against the home prior to the 2006 sale yet the judgements were not satisfied until the middle of 2008. Mortgage lenders will NOT lend money on a property that is encumbered (I've been waiting to use that word in a sentence) by liens. Before a lender will provide a mortgage, it requires all liens be paid before or at closing. This is a pretty basic rule of mortgage lending and even a subprime lender will not deviate from this rule, especially for what is almost a million-dollar loan.
One creditor informed JJ the lien was satisfied by a claim against the title insurance policy. Translation: the liens were not paid at closing. If the attorney or notary had performed a the required title search on the home, the liens would have been discovered and WMC would have been notified about the liens and required them to be paid before the loan was closed. The obvious conclusion is no title search was ever performed or if it was ordered, it was probably altered so the lien information was hidden from the lender (the name where there is a space for a notary to sign is that of an attorney, Theresa Barnhardt, of Memphis).
Such a fraud initially seems fantastic until the facts are lined up side-by-side. Mortgage fraud is usually not hard to prove when one starts looking for it on a transaction as there is a great deal of paperwork by several parties on a transaction. Ms. Harmon was probably very familiar with how the mortgage industry operates as she has been on several mortgage industry websites. Several comments on Thursday's posts pointed out the following ads by Ms. Harmon (Broker Universe is a website for mortgage professionals and has pages where loan offices seek financing or advice on certain loan scenarios. These are not websites known to the average consumer or even realtor):
"Loan scenario: MS, $30,000, FICO, 75% LTV, Purchase, SF, full, OO
State: MS Amount: $30,000 Property type: SF Documentation: full FICO: LTV: 75%Occupancy: OO Loan purpose: Purchase SFR in MS looking for quick 25-20K hard money equity loan. House appraised at $785. Balance owed $500K Good income. No Fico requirements. lharmon@Trialfocus.com (615)481-8909 by gatorgirl June 21, 2006" (Translation: She is looking for a $30,000 second mortgage requiring no income documentation and no credit score. In other words, easy money. online ad)
"Loan scenario: TN, $450,000, stated FICO, 70% LTV, Purchase, SF, full, OO
State: TN Amount: $450,000 Property type: SF Documentation: full FICO: stated LTV: 70%Occupancy: OO Loan purpose: Purchase Just found a gem! Four year old foreclosed home that needs some cosmetic work. Bank lien $375K, but asking more. Needs about 40K in repairs. Should appraise for $650-700K when finished. Want to make offer today!" Call 615-481-8909 if you can help.by 10sgirl September 8, 2006" (Translation: No income verification required. Looking for $100,000 in easy money again. Online ad)
So apparently Ms. Harmon was advertising for second mortgages requiring no income verification or credit scores for different homes in different states at the same time in 2006, several months before she sold her home.
So what does all this mean? In recap here are the facts:
1. The house was sold on December 7, 2006 for $900,000.
2. The closing took place in Shelby County, TN.
3. The buyers were from out-of-state.
4. Ms. Harmon, the seller, had no realtor when she sold the house.
5. A subprime mortgage lender was used.
6. The loan was closed without the payment of the liens, indicating either no title search was conducted (not likely, a lender always requires it in the file) or the lien information was concealed (more likely).
7. Foreclosure proceedings were filed against the house a year after the house was sold.
8. The home was sold on September 12, 2008 at a foreclosure sale for an amount little more than a third of the sales price.
9. Ms. Harmon has apparently been advertising for second mortgages requiring no income verification or credit scores on mortgage industry websites for multiple homes before she sold her Petit Bois residence.
As stated earlier, I can speak as an expert on mortgage fraud and this more than meets the criteria for a prima facie case. No underwriter or quality control spcialist for a mortgage lender would approve these loans given these facts. The purchasers have never lived in the house. Within four months after the sale, the home was listed again for sale at $910,000 or rent at $3850 a month (It rented.)
Given the known details of Ms. Harmon and the history of the home on 2027 Petit Bois South in Jackson, the authorities should thoroughly investigate the parties involved in the sale and determine if the buyers even existed, as there is more than enough evidence to suspect the buyers may have been fictitious and the seller walked out with nearly a million dollars after the closing. These details are typical in mortgage fraud cases where people have created completely phony borrowers in order to obtain large sums of money. (It usually requires the help of someone involved in the transaction). Ms. Harmon may indeed have more to answer for than just embezzling in Tennessee and running from the police.
Additional resources: Mortgagefraudblog.com