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Prosecutors Break Mortgage Loan Ring

Posted November. 22, 2006 06:55,   


A professional loan fraud group that received tens of billions of won in mortgage loans by submitting fake sales contracts and false appraisals of unsold apartments in a metropolitan area to financial agency has been uncovered by prosecutors.

The Incheon District Public Prosecutors’ Office indicted 16 people, including sales broker Kim (36) and appraisal evaluator Kim (47), yesterday for receiving large loans from two banks and a credit card firm, taking advantage of the weak mortgage loan evaluation process.

They also indicted without detention four including sales broker Lee (41) and posted wanted notices for 13 identified criminals, including runaway Kim (37).

This fraud ring produced fake sales contracts stating that they bought apartments for two to three times more expensive price than the market prices (100 million to 200 million won) by using other people’s names from December 2004 to February 2006.

After receiving appraisals that falsely evaluate apartments 1.5 to two times more than market prices and submitting them to financial agencies, they took out 34.8 billion won in loans after putting up 205 houses of 21 apartment complexes in Seoul, Gyeonggi and Incheon as security.

The prosecution announced that although the currently confirmed loan fraud amount is 34.8 billion won, as mortgage loan related arrears add up to 65 billion won on 419 houses through last month, there could be the possibility for further fraud loan amount revisions.

Real estate brokers argue, “If only the loan managers of finance agency had valued the market price of the neighborhoods thoroughly, this fraud case could have been prevented.”

Sales brokers offered to buy apartments for 80 percent of the sales price to unsold apartment constructors and received sales right after paying contract fees of 10 percent.

Then through recruiters, they were introduced to those who lent the buyers names. Recruiters were paid 15 million won for introducing a name lender by sales brokers.

Housewives, former government workers and office workers in need of quick money to pay back credit card debts were among the name lenders, and according to the prosecution, they received 2.0 to 7.0 million won per case. The prosecution plans to indict them without detention on charges of violating the law on special measure for real estate registration.

Appraisers received 9.0 million won per false appraisal form.

After borrowing from financial agencies, sales brokers paid 80 percent of the real market sales prices to the constructors and released apartments to receive an average of 20 million won per house.

Through this method, 30 people, including appraisers, sales brokers and loan brokers, made profits of 500 million to 1 billion won over many years.

Kim Oh-soo, head of the special division of the Incheon District Public Prosecutors’ Office, said, “These criminals took advantage of the weakness of finance agencies where due to sales performance if sales contract, registration documents and appraisal forms are submitted, money is lent without further site inspections.”