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Mortgage Misery - Part 1: How scams happen

It's no secret that the country is facing a mortgage crisis. A record number of homes are in foreclosure. Many people were approved for and took on risky mortgages that, in the end, they couldn't afford. Some had adjustable rate mortgages and couldn't re-finance in a tough economy. And others were the victims of mortgage scams.

Local FBI officials tell us scam artists are part of the recent mortgage downturn. Officials say loopholes in the mortgage industry combined with tough economic times have allowed crooks to carry out schemes. The crimes have become so rampant that the FBI even launched a massive investigation dubbed "Operation Malicious Mortgage."

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Mortgage Misery - Part 2: Talking to a scam victim

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"As I began to accumulate some different properties, I started really beginning to suspect that something was wrong." We'll call this man "John." He asked us not to use his real name and to disguise his voice. A few years ago, John bought several homes as investment properties, but after a couple of years realized something wasn't quite right. "Altogether, I bought nine properties. There was a couple things that I thought were wrong. One was that it seemed like the same appraiser was doing all the appraisals," adds John.

After taking a closer look at the numbers, John learned that he bought his homes at prices inflated by tens of thousands of dollars. At the time, he believed the price was fair because it checked out with the home's appraiser, realtor, and mortgage broker. But John claims they were working together to set the home at a specific price, for their profit.

"They can determine between the three of them what the price of a property is going to be. It's pretty hard to dispute that because you have three experts and you don't realize that they're working together, but they are," explains John.

To confirm his suspicions, John went to Century 21 realtors and had them do a comparative market analysis on his homes. With a look at the numbers, you'll see a drastic difference between Century 21's sales price appraisal and the original appraisal that John received.

Here's a look at a few: The original appraiser assessed his home at 1201 Elmer in South Bend for $63,000. Century 21's analysis came up with a value of only $17,000. That's a $46,000 difference.

Another home at 618 Johnson was appraised at $62,000. Century 21's appraisal was just $8,000. That's a $54,000 difference.

Here's a comparison of a third home, located at 809 Harrison, again in South Bend. The original appraisal assessed the value at $69,000. Century 21 found the value to be just $8,700. That's a difference of more than $60,000.

"His appraisals definitely are inaccurate and there's no way that I would have known that at the time," explains John. "They had told the appraiser what the property was going to sell for and then his job was to make the appraisal come out to that dollar amount."

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Just this week, the U.S. Attorney's office said William DePalma of South Bend has agreed to plead guilty to mortgage fraud. Officials say more charges will be filed in the coming weeks. John says he hopes his story is a lesson to others to know who you're dealing with, and to do your research before signing on any dotted lines.

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After taking a closer look at the numbers, John learned that he bought his homes at prices inflated by tens of thousands of dollars. At the time, he believed the price was fair because it checked out with the home's appraiser, realtor, and mortgage broker. But John claims they were working together to set the home at a specific price, for their profit.