DATE: Thursday, September 4, 1997           TAG: 9709040441

SECTION: FRONT                   PAGE: A1   EDITION: FINAL 

SOURCE: BY LYNN WALTZ, STAFF WRITER 

DATELINE: NORFOLK                           LENGTH:  124 lines

INVESTOR PLEADS GUILTY TO $3 MILLION MORTGAGE SCAM SOME BUYERS WERE LURED BY EASY PROFITS.

The 72-year-old investor offered financially strapped home buyers a deal beyond their wildest dreams. He would pay off their credit cards, put cash in their checking accounts and help them buy a home.

It seemed too good to be true. And it was. On Wednesday, Wendell Chick pleaded guilty to a mortgage fraud scheme that bilked lending institutions of nearly $3 million in loans and left as many as 34 buyers with sub-quality homes.

Chick, of Duke Street, admitted in federal court Wednesday that he had duped both lenders and buyers in an elaborate hoax that involved bogus corporations and dummy deeds designed to artificially inflate the values of the properties.

He also faked credit applications for buyers to enable them to qualify for loans beyond their financial reach.

Most of the 34 properties involved were sold to Navy personnel who were not savvy investors. Instead, many saw in Chick the opportunity to own their own homes, living in multi-unit properties, paying their mortgage with rental income. Others were lured by the promise of easy profits, cash payoffs and free rent.

What had looked like the deal of a lifetime ended up ruining credit ratings and leaving many in bankruptcy or foreclosure. At least 20 of the 34 properties are in foreclosure or default, according to federal prosecutor Alan Salsbury.

The properties - in Norfolk, Portsmouth and Chesapeake - were spruced up with fresh paint and flowers, but the improvements were superficial.

``The house I'm in is falling apart,'' said Francis Bankins, now in bankruptcy because of the scam. ``They told me it had a new roof. They put tile over rotten wood. The landscaping was beautiful. They put (down) brand new white gravel, fresh flowers. It looked real pretty. But inside, within months it was ) ramshackle.''

Bankins purchased his triplex nearly two years ago for more than $100,000. Now, the roof leaks and the floors have holes through them, he said.

The case raises questions about the legitimacy of the inspections and appraisals of the properties, and the role of mortgage companies that allowed sub-standard properties to be sold at top-market prices to buyers who were not qualified.

Salsbury declined to comment Wednesday when asked whether any appraisers, inspectors or loan officers are under investigation. Salsbury said more arrests are expected.

But the prosecutor stressed that the victims were the financial institutions and government agencies left holding unpaid mortgages and facing losses on property values as a result of Chick's fraudulent scheme - and the buyers who went along with the scheme.

The case was broken by First Tennessee Bank after one of the buyers approached the bank, concerned about a loan application that contained false statements.

``This fraud was well-planned and extensive,'' Salsbury said. ``The defendant and his conspirators made huge profits.''

Court documents show that loans on the 34 properties totaled $2,746,564. Chick purchased the properties for cash, choosing distressed properties in foreclosure or at auction, ranging from $9,000 to $69,000 and averaging $30,000. He resold them for between $52,800 and $137,700.

One property, in the 800 block of W. 41st St. in Norfolk, was purchased for $17,000 on July 6, 1995. Less than a year later, on March 19, 1996, Chick sold the property to a Navy couple for $140,500. A few months ago, the property appraised for less than $70,000, the buyer said.

Chick purchased new appliances and replaced heating and cooling systems and water heaters. But within months of selling the property, the plumbing and electrical systems began to fail, the buyer said.

However, court documents indicate that some buyers should have - and in some cases did - suspect something was amiss. None has been charged with fraud.

Chick paid off bills and credit cards, put cash in buyers' accounts and provided bogus documents to help push through loans. Cash, loans and credit-card payments ``generally totaling several thousand dollars'' were provided to each buyer, court documents show. In most cases, the sales contract showed a down payment when none was actually made.

Chick and his conspirators submitted bogus down payments, forged letters to explain the source of funds, and provided fictitious certificates of title for car sales to explain how thousands of dollars in cash suddenly appeared in buyers' accounts. The conspirators were not named in court records.

Bankins, who bought a home in the 1200 block of Hoover St. in Chesapeake, said Chick forged tax documents and government papers for his application. ``They put money in my account, said it was mine, then withdrew it,'' Bankins said.

Bankins said Chick and his conspirators recruited buyers, promising cash and help in finding renters. They would even buy back the property.

Bankins said at least five Navy friends who bought houses from Chick have banded together to get their credit straightened out. At least one had his house condemned, Bankins said.

Chick, who faces up to 40 years in prison, has been in the real estate business for years, he told the judge Wednesday. Part of his scam involved setting up bogus holding companies that sold the properties back and forth and filed bogus deeds of trust.

The illegal practice - known as flipping - makes it appear the property gains value each time it is sold. However, the sales are only on paper and no money is exchanged.

The corporations Chick used were Tidewater First Corp., Valwynne Limited, Brown and Martin, Becerra Properties, J.E. Adkins and Co., Investor Properties of Tidewater, The Whittington Corp. and F.J. and Son.

The 34 fraudulent loan applications were made to Carl I. Brown Mortgage, First Tennessee Mortgage Company, Mid-Atlantic Financial Group, Inc. and Johnson Mortgage Co.

Nineteen of the loans were insured or guaranteed by the Department of Housing and Urban Development and the Department of Veteran Affairs.

Court papers show the government is seeking forfeitures of nearly $3 million in properties owned by Chick, including 14 real estate properties, bank accounts and vehicles. That amount represents the proceeds Chick received from fraud.

The investigation, dubbed Operation Homestead, included agents from HUD, the Department of Veterans Affairs, and the FBI. ILLUSTRATION: Photo

TAMARA VONINSKI/The Virginian-Pilot

Francis Bankins, in front of his home in the 1200 block of Hoover

Ave., is one of 34 property owners who were lured into investor

Wendell Chick's mortgage fraud scheme. Most of the properties

involved were sold to Navy personnel.

Graphic

HOW ONE HOME WAS HANDLED

SOURCE: Virginian-Pilot staff research KEYWORDS: MORTGAGE FRAUD ARREST TRIAL