Read the story below about SunBank foreclosing on 14 properties in the development and selling them at public auction. In many cases the borrower, who bought the property sight unseen at grossly inflated provces, had a close business relationship with the developer. This is a classic scam house of cards getting ready to crumble. The Feds are on the trail to be certain given all the publicity.
Bank: Property owners lied to get hefty N.C. loans
By Lucy Morgan, For the Chronicle
[SIZE=-2]Posted: Wednesday, Aug 13, 2008 - 09:41:01 am EDT[/SIZE]
Last week, SunTrust officials accused 14 property owners in a North Carolina real estate development of falsifying their income when they obtained mortgages totaling more than $20 million.
SunTrust Mortgage Vice President Cary L. Mudge said in affidavits that the 14 borrowers inflated their monthly income, lied about their job title or falsely claimed employment when they really were retired. Some borrowers had joint bank accounts with Domenic Rabuffo, a Florida developer who went to federal prison in 1994 for a $49 million New York mortgage fraud.
The bank affidavits, added to the foreclosure suits filed in Jackson County, note that each of the borrowers signed a certificate required by federal law acknowledging that it is a criminal act to provide false information on a mortgage loan application. Anyone convicted of violating the law can be sentenced to 30 years in prison and fined up to $1 million.
Bank attorney Robert K. Imperial of Raleigh said he could not answer questions about the allegations and would not say whether bank officials have asked law enforcement to investigate. He also declined to answer questions about 10 other SunTrust loans outstanding in the same development.
All of the loans involve lots in Blue Ridge Mountain Estates, a development on Big Ridge, a remote mountain community about 10 miles north of Cashiers. The area is a haven for Florida retirees who escape the summer heat.
Despite a huge downturn in the real estate market, Rabuffo is building huge luxury homes sandwiched on 1-acre lots. He acquired the land, mostly in the name of his ex-wife, Mae. Some of the buyers never laid eyes on the property and say they bought it after hearing about the project from Rabuffo at dinner meetings in the Tampa Bay area.
The 14 borrowers, nine from Florida, five from Pennsylvania, each borrowed $1.5 million to finance construction of houses in the development. Altogether the 14 borrowers owe a total of $8.5 million, money distributed by SunTrust for construction.
Jackson County Superior Court Clerk Ann Melton has approved the sale of the lots at public auction.
John Pavey, a Sylva attorney who has handled most of the paperwork for Rabuffo, represented 13 of the lot owners at a hearing before Milton Monday. Pavey said he plans to appeal the decision.
Pavey said the Suntrust allegations are untrue and there is no debt to be paid at this time. "The fact that they can't verify the income, doesn't mean they don't make it," he said.
Asked about the foreclosure actions last month, Rabuffo said SunTrust is just trying to get rid of loans where borrowers owe more than the property is worth in a depressed market.
(Editor's note: Lucy Morgan is a semi-retired, Pulitzer Prize winning investigative reporter for the St. Petersburg Times. She is a part-year resident of the Cashiers Valley area. The original version of this story ran in the St. Petersburg Times, August 8, 2008. Researcher Caryn Baird contributed to this report. Lucy Morgan can be reached at
lmorgan@sptimes.com.)
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