Clarification to This Article
This article on a federal investigation of mortgage fraud said that an "investor, Wayne A. Lee" purchased townhouses in a Woodbridge subdivision at high prices. The Wayne A. Lee to whom the article referred is not real estate agent Wayne A. Lee of Buyers Advantage Real Estate Corp., in Woodbridge, who coincidentally has the same name.

FBI Probes Virginia Mortgage Scam

Damion Coates and Michelle Holzhauer discovered by accident that the house they rented in the Villages at Rippon Landing was in foreclosure, one of several in the subdivision that were bought and resold quickly to buyers who defaulted on mortgage payments.
Damion Coates and Michelle Holzhauer discovered by accident that the house they rented in the Villages at Rippon Landing was in foreclosure, one of several in the subdivision that were bought and resold quickly to buyers who defaulted on mortgage payments. (Photos By Dayna Smith -- The Washington Post)

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By Allan Lengel
Washington Post Staff Writer
Tuesday, December 18, 2007

The sidewalks are still scrubbed and most lawns are neatly trimmed, but now the subdivision of townhouses off Route 1 in Woodbridge is pocked with empty windows and foreclosures. Federal investigators are poking around.

Sources with knowledge of the probe at the Villages at Rippon Landing said investigators are examining why a number of townhouses in a five-block area were bought and resold quickly, for a large profit, even as the real estate market was cooling and unsold homes dotted the neighborhood. The new buyers sometimes failed to pay the mortgages, sending homes into foreclosure and hurting lenders. Renters found themselves unexpectedly forced to move.

The FBI this month launched a mortgage fraud task force, gathering federal prosecutors and law enforcement officials from Prince William, Loudoun and Fairfax counties to map out a strategy to tackle the issue region-wide. One of the federal investigations is centered on Rippon Landing, according to Steve Durst, a U.S. Postal Inspection Service spokesman for the D.C. division, whose agency investigates mortgage fraud because it involves use of the mail. Durst declined to elaborate.

The FBI is also involved in the probe, according to sources familiar with the investigation. Adam Lee, a supervisor for the FBI squad that oversees mortgage fraud investigations locally, declined to comment on the Woodbridge probe but said of mortgage fraud in general, "Right now we have a full plate of those type of cases." An FBI report pegged the amount of fraud in 2006 at $4.2 billion nationally. Those cases often involved the use of bogus appraisals to obtain inflated loans, sometimes with the buyers and sellers working together to defraud the lender.

H.T. Thompson, who was renting one of the Rippon Landing townhouses, began receiving foreclosure notices addressed to the owner several months after moving in. "I said to my husband, 'This house is about to go into foreclosure.' " It did, and her family recently was forced to move. "It has disrupted our whole life," she said.

A Northern Virginia appraiser who spoke on the condition of anonymity said he approached authorities several months ago after becoming suspicious when a client told him about an opportunity to make quick money from buying a townhouse in the Woodbridge subdivision. He reviewed land records in Rippon Landing and found that some of the sales prices had unexpectedly spiked at a time when the broader market was falling.

The subdivision is part of a sprawling 186-acre community at Route 1 and Rippon Boulevard being developed by D.R. Horton of Fort Worth, one of the nation's largest home builders. Construction at Rippon Landing started in 2005, and people began moving in about January 2006, the height of the housing boom. During that period, properties were quickly snatched up, and townhouses were selling in the upper $500,000s, according to residents and property records.

The real estate market began weakening in the middle of the year, prices in the subdivision plummeted, and there soon were a number of townhouses unsold in the neighborhood. The price of new townhouses fell to the mid-to-low $400,000s, and some eventually dipped below $350,000.

Yet even as demand for the subdivision's townhouses was softening, investors -- including a mortgage broker, some real estate agents and other businessmen -- bought more than 20 new units from the builder for $407,345 to $470,890, and then resold them in a matter of weeks or months, making a $110,000 to $160,000 profit per house, according to land records. Some of those townhouses were never occupied and went into foreclosure, according to county land records and residents of the neighborhood.

The developer, D.R. Horton, did not return several calls placed over several weeks.

Several major lenders that provided loans for the Woodbridge purchases did not return phone calls or declined to comment.

The Virginia Real Estate Appraiser Board said it has received a complaint involving Marc Schoeni of Alliance Appraisal Services in Alexandria, whose company performed appraisals on some of the higher-priced properties. Schoeni defended his appraisals in the neighborhood, saying they were backed up by comparable sales and buyers' willingness to pay the higher prices.


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© 2007 The Washington Post Company

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