"In mortgage-fraud schemes, a property owner obtains a fraudulent appraisal establishing an inflated price for the home, according to the FBI. The owner sells the property to a "straw" buyer, who is a partner in the scam and has taken out a mortgage for the inflated price from a bank unfamiliar with local property values. The seller receives a check from the lender, minus any money owed on the property, which he splits with the buyer. Usually, an appraiser and a mortgage broker also get a cut.
The buyer eventually allows the home to go into foreclosure, leaving the bank with a property worth far less than the mortgage. His or her credit rating will be ruined by the foreclosures, but prosecutions of mortgage fraud have been limited because it's difficult to track, the FBI said."
Read more at:
http://blog.mlive.com/kzgazette/2008/06/hixon_story.html
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