MO builder indicted in $10 million construction loan fraud

In the following press release Catherine L. Hanaway, U.S. Attorney for the Eastern District of Missouri announced that Edward Levinson was indicted on bank fraud charges in connection with his construction business, resulting in more than $10 million in losses to banks and prospective home owners and subcontractors, United States Attorney Catherine L. Hanaway announced today.
According to the indictment, Edward A. Levinson was in the residential and commercial real estate construction and sale business, doing business under the name of Levinson Companies, a/k/a Wynncrest, Inc., Terra Vista, Inc., Belle Maison, Inc., and Levinson Building and Realty Corporation, among others. Levinson had construction lending relationships with Royal Banks of Missouri; First Bank; and Enterprise Bank and Trust. The purpose of the loans was initially to purchase and develop land and later construct residences for sale to the public.
Royal Banks of Missouri financed the Wynncrest/Terra Vista Projects’ land acquisition, development, and construction of residences at a Levinson project known as Wynncrest Phase I, St. Louis County, MO, in 2003,and two more Levinson projects known as Wynncrest Phase II, and Terra Vista, both in St. Louis County, in 2006.
Beginning in September 2007, Royal Banks of Missouri became uncomfortable with their loan exposure with Levinson and demanded that Levinson obtain a third party disburser of money to pay subcontractors on the construction of homes at Wynncrest Phase II and Terra Vista. At this time, Levinson had cash flow problems on his construction projects and attempted to obtain more financing initially from Royal Banks of Missouri and subsequently numerous financial institutions.
In November 2007, Royal Banks of Missouri hired an independent appraiser to re-appraise Wynncrest Phase II, and as a result of this appraisal Royal Banks of Missouri refused Levinson’s request for additional financing. Levinson then went to Enterprise Bank and obtained the additional financing for Wynncrest Phase II without the requirement of utilizing a third party disburser of loan money.
The indictment alleges that in early February 2008 Levinson refinanced two Wynncrest Phase II display homes through Enterprise Bank and Trust, reducing the loan debt to Royal Banks of Missouri. Enterprise also agreed to provide construction financing of pre-sold homes at Wynncrest Phase II up to a total of approximately $3,500,000.
However, in April 2008, Levinson obtained an additional $500,000 loan from Royal Banks of Missouri for the Wynncrest Phase II and Terra Vista Projects. During this time, at Royal Banks of Missouri’s request, Levinson sold two lots at Wynncrest Phase II to another builder for more than $200,000 each, reducing his debt to Royal Banks of Missouri and generating limited funds for working capital.
During this time, Levinson contracted numerous purchasers/buyers of Wynncrest Phase II and Terra Vista lots and homes built to specifications of the purchaser/buyers. In return, they paid Levinson a lot deposit and down payment earnest money for the construction of their homes. A number of these purchasers requested their money be placed in a escrow account, and in each instance Levinson refused. Levinson used these contracts to build homes to obtain financing to build the specific homes and pay subcontractors for the construction of these homes.
However, the indictment alleges that down payments/earnest money and construction loan money was used for other projects, other unrelated business interests, and other overhead expenses unrelated to the specific purposes of these monies. During the Wynncrest and Terra Vista developments financed by Royal Banks of Missouri and later Enterprise Bank and Trust, home buyers closed on homes where subcontractors later filed mechanics liens totaling in excess of $500,000. Some home buyers on the Wynncrest and Terra Vista developments failed to close on their contracted homes which were never completed and lost all their down payments for the expected construction of a Levinson home.
The Wynncrest/ Terra Vista Projects were foreclosed upon beginning October 2008 by Royal Banks of Missouri and Enterprise Bank and Trust resulting in losses of approximately $1,500,000 to Royal Banks of Missouri; approximately $1,000,000 to Enterprise Bank and Trust; approximately $300,000 to home buyers; and approximately $500,000 in subcontractor liens against banks and homeowners and home owners associations.
The indictment further alleges that in February 2007, Levinson closed on an $18,000,000 deal with First Bank to finance the land acquisition, development, and construction of homes at the Belle Maison Project. Similar to the Wynncrest Phase II / Terra Vista Projects home buyers would contract with Levinson to build/purchase homes giving him deposit money and down payments.
Again, Levinson would use these contracts to obtain loan money from First Bank to build a specific home, and again Levinson used deposit money/down payments and First Bank loan money for other purposes. Home buyers failed to obtain completed homes, did not close on these home contracts and lost their down payment money and other payments to Levinson for home construction.
Subcontractors also performed specific work and were not paid and First Bank lost loan money which was disbursed at Levinson’s direction for the construction of specific homes. In early December 2008, First Bank foreclosed resulting in losses of $8,000,000 on First Bank loans; approximately $241,000 to home buyers; and approximately $1,000,000 on subcontractor liens against First Bank.
Levinson, 49, Chesterfield, MO, was indicted by a federal grand jury late Thursday, on ten felony counts of bank fraud.
If convicted, each count of bank fraud carries a maximum penalty of 30 years in prison and/or fines up to $1,000,000. Restitution is mandatory.
Hanaway commended the work on the case by the Federal Bureau of Investigation, and First Assistant United States Attorney Michael W. Reap, who is handling the case for the U.S. Attorney’s Office.
The charges set forth in an indictment are merely accusations, and each defendant is presumed innocent until and unless proven guilty.

US Mortgage v/s Indian Home Loan

I am watching US Mortgage scenario very closely for almost a year. What I understood and clear about one thing that the recession starting from USA and trigger point was US MORTGAGE.
 
US President also acknowledge this problem, at number of time and at different forum and meetings. 
 
Why it happened and why we should watch our real estate developer because the developer uses their customer to raise money from market by using Mortgage or Home Loan very effectively. 
 
In India if a developer want to raise money from bank then they have to go for project appraisal and have to provide extra collateral ( Property as security) and have to pay interest @15% per annum.
 
Home Loan is liability of customer and not developer, Developer give discount on property as Down payment discount or takes money on construction demand basis. The Customer pays money to bank as EMI or Pre EMI.
 
Very recently I came across a new trend where developer looks for high net-worth individual, who can borrow good sum of money. The developer take very less or no money and issue receipt on PDC. Further developer undertakes to pay EMI of Customer for a period of construction time. The developer further enters into a buy back agreement with customer to purchase property back at pre-decided rate.
 
What is the catch or problem with this exercise?
Developer issue few papers to banker (HFC) and they are as follows:
§ Builder Buyer Agreement
§ Permission to Mortgage
§ Tripartite agreement
§ Money receipt
 
Apart from these, Developer provides all photocopy of land documents and photocopy of approvals and Maps for project approval form Home Loan Bank or HFC.
 
In Permission to mortgage and TPA, the Developer promises to Bank or Home Finance Company that they will not transfer the property without the permission of Bank or HFC.
 
See in this case, if developer go through tough time and do not pay the EMI, then who going to be loser. 
 
If developer stops his project then how bank going to recover the money. Will bank people run after the borrower or the developer?
 
There are so many questions and no body know the answer, but I can say one thing that Indian Home Loan is also sitting on a Time Bomb and it can blow at any time.

are U save, are U sure, your real estate Builder is not cheating on you?

One of my customer, who wanted to take home loan from my bank failed to get the requisit information from the Real Estate developer of his flat.
This customer of us booked a flat in a builder flat at Indirapuram Ghaziabad. The Builder taken 20% from this person and was asking 10% more as the customer sign the application from where it was written about the condition. The customer wanted to avile Home Loan facility, but the builder not having complete Land paper and the approve plan was pending with authority. In that condition builder do not have any right to demand any money accept the 5% or 10% of booking amount. My customer failed to provide the builder papers and loan was never disbursed. It was almost one year bank and resently I come across my customer and still builder not got the required documents.
I am really worry about large number of people who has invested their hard earn money in to builder project.

USA a Country LOVED by every One

USA a very beautiful developed country with history of doing things first. First in Space, First to reach Moon, first to save World and first to put every one in recesion. The Mortgage or Home Loan where I worked and is epi centre of world recesion. It started from USA and spreading like Jungal fire all over the world. As I am in India I am worried about the future of my counrty.

As I am on day to day basis watch the people from my industry and specially real estate industry, who are some how are going in the same way as it was started in USA some time 2006 end.

Over Priceing of housing, default by the real estate developer.