Bill Denny looks like he is always tired. His suit is rumpled, and his eyes bear the marks of poring over thousands of legal pages: quitclaim deeds, reconveyances, and mortgage refinance documents. Since 1998, Denny has run the real-estate fraud unit for the Alameda County District Attorney. But for all the hours he pours into his job, he knows the criminals usually get away with it. For example, over lunch at a greasy Fruitvale restaurant, he demonstrated how to steal $30,000 with a napkin.
"Gimme a pen," he said, and started writing. "Okay. Take this to the recorder's office on Oak Street this afternoon. All you have to do is get Joe Smith to sign here, or let's just forge his name. Just sign right there. Go to the assessor's office and find out the assessor's parcel number, 'cause that's required by law. The notary is sealed here, witnessing the signature of Joe Smith -- you can find a crooked notary in about ten minutes. You can take a cocktail napkin to the recorder's office, and as long as it fulfills these requirements, there's now on record this property being conveyed to you."
Two days after the napkin is filed, you can secure a loan against the property for tens of thousands of dollars. Because the mortgage industry is virtually unregulated, almost no one bothers to check if the borrower actually owns the property. As long as there's a piece of paper on file with the county, that's good enough for the bank.
"There you have it," Denny said, shoving the napkin across the table. "You've now forged a grant deed. Within 48 hours, you can get an electronic loan. ... Why don't you get somebody to try it? I won't catch up to them for about two years."
Eight years ago, Denny was working violent crimes when lawyers with the District Attorney's office found some funds they could use to prosecute real-estate fraud. When Denny agreed to run the office -- which consisted of himself and an investigator -- he had no idea what he was in for. But as soon as he started digging, he realized this was perhaps the greatest crime wave he had ever seen.
Thanks to the surreal housing market, and an explosion of new forms of credit, real-estate fraud has become a quiet epidemic. In December, the Federal Bureau of Investigation announced that cases of real-estate fraud nationwide rose from 3,088 in 1999 to 21,944 in 2005, a 600-percent increase. Losses from these cases totaled more than $1 billion in 2005 -- and that's only the crimes the bureau's investigators know about, since two-thirds of the nation's mortgage lenders refused to report the incidents they discovered.
As the lenders began aggressively offering subprime loans to people with bad credit in the mid-1990s, and the booming housing market meant elderly Oakland homeowners were sitting on properties worth half a million dollars, unscrupulous mortgage brokers and simple criminals began concocting schemes that boggled the mind: equity skimming, foreclosure-rescue scams, yield-spread premiums, backward applications, identity theft. Dozens, perhaps hundreds of frauds were being perpetrated in the East Bay every year, a phenomenon so pervasive that Denny dubbed it "the theft of Elder Nation."
Denny has since spent his career trying to stop a massive wave of white-collar crime. But for all his dedication, the unsettling fact is that Denny, and every level of law enforcement, is losing this battle. For one thing, the frauds are so sophisticated that his office must assemble about twenty thousand pages of documents just to prove the average crime. Then Denny has to find a way to explain these cons to judges and juries overwhelmed by their complexity.
But that's only if he manages to get the documents he needs. The mortgage industry is barely regulated, and almost everyone is tacitly complicit. Title companies aren't legally required to report crimes that happen under their noses; in fact, when Denny approaches these companies, they often refuse to cooperate, even when he has permission from the victim. "Because they have concerns about the privacy of the other party -- who's often the crook," he says. "The system is hamstrung by the privacy laws."
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