Carmel on the Case: Mortgage Fraud

WSVN -- It was 1998, and James Chancelor was not happy to see me. And he still doesn't want to talk.

Chancelor declined an interview about his arrest this month on multiple felony charges. Back in 1998, Chancelor blamed customers when they complained he took money from them after promising to find homes and financing and failed to deliver anything.

James Chancelor: "Sometimes people, they don't understand the legalities of doing business."

Herbert Pitts: "This is your dream, and this man is actually playing with people's dreams."

The state agreed with the customers, and Chancelor was later arrested. He plead guilty to grand theft, paid restitution and served probation. Now, he is in trouble again.

Robert Crespo: "He's been accused of being the orchestrator in a mortgage fraud scheme."

Robert Crespo is the area director for the State Office of Financial Regulation. He says Chancelor is charged with six counts of grand theft and mortgage fraud.

He's accused of applying for a mortgage on this home in Miami-Dade and two others in gated communities in southwest Broward County.

The catch is that Crespo says Chancelor used phoney buyers, called straw buyers, to take out those mortages, which is illegal.

Robert Crespo: "But the fact is the straw buyers do not live in the properties, they do not reside in the properties."

Carmel Cafiero: "They're fake buyers?"

Robert Crespo: "Correct."

Crespo says the only one to benefit from those transactions was James Chancelor.

Typically in straw buyer cases this is how it works. The fraudster uses someone else's name and credit to get loans he could never qualify for on his own. More often than not, those loans end up in foreclosure. In Chancelor's Case, Crespo says lenders could end up losing more than one million dollars.

Robert Crespo: "Everybody is affected, because it affects the mortgage industry as a whole and the borrowers and people that are applying for loans."

For Chancelor, he is ending the year in much the same way as he started it: busted. Last January, he was also arrested and charged with grand theft, fraud and acting as a real estate broker without a license. He is currently free on bond for both cases.

Robert Crespo: "He has been convicted of fraudulent activities in the past, and he's just somebody who has not gone away."

South Florida has the dubious distinction of leading the nation when it comes to mortgage fraud. And experts say this kind of crime affects us all, because the costs have a negative impact on the availability of affordable home loans.