Q & A with Michael Sichenzia, con artist-turned-mortgage pro

Miami /
Feb.February 13, 2009 04:04 PM

Michael Sichenzia’s spokesperson describes him as similar to Leonardo DiCaprio’s forger-turned-FBI consultant in the movie “Catch Me If You Can.” Sichenzia spent four years in a New York State prison for committing two million dollars in mortgage fraud as manager of Equity Capital Fund and NHDV Equities, private equity funds in New York. Sprung from prison in 2005, Sichenzia is now CEO of Dynamic Consulting Enterprises, a Deerfield Beach, Fla.-based firm that does loan modifications for homeowners and small businesses. It’s been a tough year in Florida, which had the country’s fourth-highest foreclosure rate as of January.
The Real Deal caught up with Sichenzia, 49, to discuss mortgage fraud and possible solutions to the foreclosure epidemic.

You went to prison for mortgage fraud. What happened?

My conviction resulted from the creation and selling of mortgages in the secondary market to investors that were based on fraudulent terms. I used to create junk paper. We delivered a low cost, addictive commodity. I did just under four years.

What brought you over to the other side, so to speak?

Ninety-five percent of everything that I did in business [before going to prison] was legitimate, it was that small 5 percent that wasn’t. When I got out of prison, I was lucky enough to team up with a group of attorneys [in South Florida]. We were able to solve some pretty good cases.

How’s business at Dynamic Consulting Enterprises?

We are really at the forefront of loan modification and loan workouts for residential customers and corporate clients. We restructure debt for homeowners … We incorporated Dynamic in January of 2006 [and] back then, nobody was really talking about foreclosures. Last year we serviced over 760 clients.

It seems like there’s been an uptick in mortgage fraud cases in Florida recently. Has fraud increased, or are more people getting caught?

There really [hasn’t been] an uptick. Florida has always been the mortgage fraud capital of America. There’s been more mortgage fraud committed in Florida than anywhere else. [But law enforcement has] really started to focus on some of the players and more of the scams that have gone on here.

Are most of your clients in Florida?

Since we started in Florida, yes, but we see more and more cases coming from Ohio. New York is an area where we see more and more newer ones … Long Island, the boroughs. Not particularly in Manhattan, although we’re seeing more and more people who were involved in the financial industry now in great difficulty trying to get out from under their debts.

When do you predict the market will hit bottom and then rebound?

The number of properties that are bank-owned that are on the market lags considerably behind the number of homes taken by banks in foreclosures … in Florida I don’t see a bottom well into next year. Mortgage applications are up [and] the developers here are throwing everything at the potential buyer to get them to buy a house. You’ll lose 30 percent more in Florida. The value has no way to go but down…Rents are down; that’s also indicative of a bad-performing market.

What can the government do to address the situation?

The biggest problem the government has with dealing with loan modification is that it’s really hard to do loan modifications en masse. We need more uniform guidelines. I think we’re moving in the right direction [but] it’ll probably be another year before we get to the point where [the country is] doing enough loan modifications.

What [the government] could do is [institute] more moratoriums. The number of bank-owned properties is four to one in favor of what’s still in inventory that’s not yet been put on the market. I could never say as a lender that it makes more sense [for the lender] to take this home.

The next thing is to get back to basics. The closer we are between the borrower and the person actually lending the money, the better we always are.

So no more securitization?

Unfortunately, securitizing is the only way to do it today. We allowed the securitizer to get off the hook. If we have securitization, which I think we will … we have to keep the securitizer on the hook. The way you keep him on the hook is you make him responsible to all parties for any fraudulent acts in the origination of the loan.

Any good news in the market right now?

If you’re a buyer and have a little bit of cash, you can price the bottom into your purchase. You can buy a house today and close today at what you think the price will be six months from now … As a buyer, this is not a bad opportunity.

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