Scamming the Mortgage Scammer

January 1, 2008

Mortgage fraud has become all too prevalent in some areas as buyers and sellers struggle with a volatile financial market. But you know things are getting surreal when one party to a fraud scheme is scammed by another — and then tries to sue and recover damages.

Fortunately the 7th U.S. Circuit Court of Appeals put a stop to that. In the case, Michael Stapleton allegedly proposed to Trent Decatur that Stapleton would locate undervalued houses, which he would arrange to have appraised at twice their value. Decatur in turn would borrow an inflated amount from a mortgage broker who was part of the scheme. Decatur was supposed to receive rent from the properties while Stapleton used the extra funds to renovate and find tenants.

Instead, Stapleton and the appraiser allegedly split most of the money left after purchasing the house and stopped paying Decatur rent after a few months. Decatur sued them for fraud and negligence.

After a trial court dismissed the case, Decatur appealed, claiming that Stapleton and the mortgage broker were his agents. This, said the court, was “loopy.” It also rejected Decatur’s claim that the appraiser was guilty of negligence since Indiana law states that a professional cannot be liable for information provided indirectly to a third party (in this case, the bank). Just proves you can scam a scammer.

Mariwyn Evans

Mariwyn Evans is a former REALTOR® Magazine writer and editor, covering both residential brokerage and commercial real estate topics.