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Mortgage scam victims speak out


A nutritionist, mortgage broker, real estate agent and office receptionist told how they were all victims of the mortgage ramping scam run from a Mt Albert real estate office.

Three former Barfoot & Thompson agents face losing their sales certificates after falsely inflating house values by using the illegal scheme of "hydraulicing" or jacking up prices.

This week the Real Estate Institute brought its case against former Barfoot agents Philip Cavanagh, Raghu Aryasomayajula and Philip Niall. Only Mr Niall appeared at the inquiry in Newmarket.

BNZ, ANZ and Westpac all loaned money on the many properties involved and participated in the scheme by loaning far more than the properties were actually worth.

The Real Estate Agents Licensing Board this week heard from four people left owning properties they did not intend to buy, forced to sell places at huge discounts, and how they suffered financially from the scam.

The board reserved its decision.

The four victims have suffered losses to the tune of about $2 million.

Nutritionist Dean Geddes told the board how he met Mr Cavanagh at work at the Les Mills gym on Victoria St. He was offered $20,000 to put his name on the title of a house at 8 Trafalgar St in Onehunga.

Allwin Holdings, controlled by Mr Aryasomayajula and Mr Cavanagh, owned the place and sold it to Mr Geddes for $960,000.

BNZ employee Colin McTaggart approved the loan and Mr Cavanagh also acted as the agent for that deal.

The agents were to subdivide and sell the property for profit, using Mr Geddes' name to ensure the finance was granted.

But instead, they left Mr Geddes owning the place, never developed it and never paid the $20,000.

Lorraine Ramsey, BNZ manager of strategic business services in risk management, asked Mr Geddes about the deal and demanded the loan be repaid, he said.

The place was sold for just $595,000 and Mr Geddes said the BNZ was now pursuing him for $285,000, the shortfall caused by the price drop, agents' fees, interest and other expenses.

Rohit Ranchhod, a mortgage broker, said he bought six flats at 265 Kohimarama Rd from Aryasomayajula for the hugely inflated price of $2.2 million. A subsequent mortgagee sale of three flats was for just $530,000.

Greg Nelson, a real estate agent now at Remax First but formerly of Barfoots, agreed to buy one of two places at 9 Melanesia Rd in Kohimarama for $1.2 million, though he was aware Aryasomayajula had paid just $1.7 million for both properties.

He told the board he thought the property he bought was inflated by about $500,000. The deal was funded by ANZ but now Mr Nelson is trying to sell his place for just $610,000.

The other place at 9 Melanesia Rd was quit in a mortgagee sale by Sovereign for $615,000, Mr Nelson told the board.

Receptionist Cassidy Jones, who works at Remax Central in Remuera, was offered $10,000 to put her name on the title for 9 Melanesia Rd. She thought she would not own the place but was being used to help Mr Nelson's deal go through. She wanted to be rid of debts "dragging me down" and agreed to the deal, a move she described this week as stupid.

Steve Haszard of the Crown Law Office said the "scheme or scam" involved document alteration as well as mortgage ramping.

The BNZ has improved systems to guard against becoming a victim of a hoax like this again.

Diane Maxwell, manager of external relations at BNZ, said: "It's fair to say that in the light of mortgage ramping occurring in the past 12 to 24 months we've tightened some of our processes.

"The bank still lends against sale and purchase agreements in certain circumstances. However, the policy has been significantly reviewed in an effort to minimise false or misleading contracts to be relied upon," she said.