The private lending industry is taking fraud seriously—and real estate investors should, too. A compelling deal, a polished presentation, or a familiar name in an investor community is not a substitute for verifying the people, property, and financing behind a transaction.
At Levine Capital, that matters to how we approach investor financing. We are a member of the National Private Lenders Association, or NPLA, with access to its industry Watchlist. We are also a preferred lender in SubTo and Owners Club, and a Morby Method- and Stack Method-friendly lender. Supporting creative financing and maintaining disciplined review belong together.
Recent reporting about alleged DSCR mortgage fraud in Baltimore shows why the distinction matters. The lesson is not that rental financing or creative deal structures are inherently suspect. It is that false information and concealed arrangements can create serious risks—and the industry is strengthening its response.
What the Baltimore Report Says—and Why It Matters
An October 20, 2026, Realtor.com report describes two civil lawsuits involving alleged mortgage fraud tied to Baltimore investment properties. According to the reporting, the lawsuits allege inflated property valuations, undisclosed relationships between parties, misleading appraisal materials, and missing prior-sale information. They also describe foreclosures affecting properties involved in the alleged activity. 1
These are allegations in civil lawsuits, not findings that every accused party committed fraud. They should not be treated as convictions. Nor should anyone assume that a person discussed in a news report appears on an industry watchlist.
For investors, the practical concern is clear: a financing decision can be undermined when the information supporting it does not reflect the real transaction. A purchase price may look reasonable until the ownership history is examined. Rental income may appear sufficient until the actual leases and occupancy are checked. A completed renovation may look convincing in a presentation but lack supporting records.
Those gaps can affect more than a lender’s collateral. They can leave buyers with a property that does not perform as expected, interrupt renovation plans, and create uncertainty for tenants. Honest investors have a stake in stronger controls because reliable financing depends on credible information.
The Industry Response: Better Intelligence and Real Accountability
The crackdown is not just a headline. It includes industry efforts to identify risk earlier and enforcement when wrongdoing is established.
NPLA’s Watchlist is one example of the private lending industry building stronger risk controls. The association describes it as a secure, members-only resource that helps authorized users identify potentially high-risk counterparties before funding. It is designed to complement a lender’s existing review—not replace it. 2
There are also proven enforcement outcomes. In a separate Baltimore-area real estate bank-fraud case, the U.S. Department of Justice announced on June 23, 2026, that an attorney was sentenced to 15 months in prison for conspiracy to commit bank fraud. The announcement describes concealed side agreements, misrepresented purchase prices, and undisclosed movements of funds. That case is distinct from the civil allegations in the October Realtor.com report. 3
Together, these examples reinforce an important message: transparency is not optional. A legitimate structure should be presented accurately to the parties responsible for approving and documenting it.
How Levine Capital’s NPLA Watchlist Access Adds Perspective
Through its NPLA membership and Watchlist access, Levine Capital has an additional industry resource available to support counterparty awareness. That can provide context beyond the information in a single loan application.
NPLA says authorized users can search names and entities through a login-protected portal. A possible match can be a reason for heightened due diligence or a decision not to proceed under the applicable credit provider’s standards. Access is subject to program terms, confidentiality requirements, and authorized-user designation. 2
The value is the opportunity to ask better questions before money moves. Does the entity in the application match the people actually controlling the transaction? Is there information that warrants closer review? Do the supporting documents resolve the concern?
A Watchlist match is not proof of fraud. A similar name may not identify the same person, and a risk flag does not establish criminal guilt or civil liability. Equally, no match does not mean a transaction is safe. No database can replace verification of the borrower, property, valuation, title, and closing arrangements.
Watchlist information must also remain within its permitted use. This article does not disclose private entries, search results, or confidential submissions. The purpose is responsible awareness, not a public accusation list.
DSCR Financing Still Requires Real Due Diligence
Debt service coverage ratio, or DSCR, financing helps investors evaluate rental-property financing using the property’s qualifying income and debt-service requirements. The calculation and qualifying requirements vary by program. Levine Capital’s creative-finance lending overview explains how rental financing can fit into a broader deal structure. 4
Property-based qualification does not mean the borrower, ownership, or supporting documents stop mattering. Nor does an acceptable ratio prove that an investment will be profitable. Taxes, insurance, repairs, vacancy, management costs, and other obligations still affect the investor’s actual results.
The Baltimore allegations are a reminder to examine the assumptions behind the numbers. Is the rent supported? Does the property’s condition match the valuation? Are existing debts and proposed financing arrangements fully disclosed?
An LLC can be a legitimate ownership vehicle. It is not a reason to obscure who controls the borrower or who is responsible for the obligations. Clear entity records and accurate disclosures help the lending and closing teams understand the real scenario.
Creative Financing Is Not the Same as Concealed Financing
Levine Capital is a Morby Method- and Stack Method-friendly lender. We allow seller-second financing for eligible transactions using these strategies, subject to underwriting and the requirements of the applicable financing program.
A seller second generally means the seller carries financing in a lien position behind the senior loan. The seller’s terms, repayment obligations, lien priority, and relationship to the rest of the financing must be reviewed and properly documented. Not every program permits the same structure or terms.
The important distinction is disclosure. A seller carryback presented to the lender and closing team for approval is different from a side agreement deliberately kept out of the financing review. A disclosed transactional funding arrangement is different from representing borrowed money as funds that belong to the buyer without explaining its source or repayment obligations.
Investors should bring the whole proposed structure forward early. That includes seller financing, gap funding, transactional funding, credits, ownership arrangements, and any credit sponsor or funding partner. Qualified closing professionals should document the approved structure accurately.
Being creative-finance friendly does not mean bypassing requirements. It means understanding the strategy well enough to evaluate it honestly. Learn more about Levine Capital’s Morby Method and Stack Method financing approach. 4
Warning Signs That Deserve a Closer Look
A red flag is a reason to investigate, not a reason to publicly label someone a bad actor. Some unusual transactions have legitimate explanations. The question is whether the explanation is accurate, documented, and consistent with the rest of the file.
A Large Price Increase Without Supporting Evidence
A property can gain value after meaningful improvements or a change in its use. But a sharp increase over a short period should be supported by the property’s actual condition, credible valuation evidence, and a clear transaction history.
Ask what changed and how it can be verified. A renovation claim should not rest on attractive photographs alone. Depending on the work, invoices, permits, inspection records, and other documentation may help explain the change.
Relationships Between Parties That Are Not Disclosed
A shared address, contact person, or ownership connection does not automatically establish wrongdoing. It can, however, raise questions about whether the transaction is truly independent and whether the lender has been told about all relevant relationships.
Make sure the seller, buyer, borrower entity, and authorized signers are accurately identified. If parties are related, disclose that relationship instead of assuming it is unimportant.
Rental Claims That Do Not Match the Property
Projected rent and collected rent are not the same thing. A lease should be consistent with the property’s occupancy and the income being represented. Supporting information should be reviewed under the applicable loan program.
If a property is vacant, disclose it. If the business plan depends on future renovations or a higher future rent, describe that as a projection—not an established operating result.
Requests to Leave Terms Out of the File
Be cautious if someone says a seller note, refund, funding source, or repayment agreement should not be shared with the lender or title company. An explanation such as “everyone does it this way” does not resolve the issue.
Ask for the arrangement to be reviewed before proceeding. If the transaction depends on hiding a material fact, stop and seek qualified advice.
Last-Minute Changes to Money Movement
Unexpected changes to wire instructions, payment recipients, or closing arrangements deserve independent verification. Confirm instructions through a trusted contact using a previously verified phone number—not only the contact details in the message announcing the change.
Do not let urgency replace verification. A closing deadline is not a reason to send funds to an unconfirmed recipient.
Preferred Lender in SubTo and Owners Club—With Standards That Still Matter
Levine Capital is a preferred lender in SubTo and Owners Club. Our connection to these investor communities goes alongside an understanding of Morby Method and Stack Method transactions, including eligible seller-second structures.
Community relationships can help investors find resources and experienced professionals. But participation in any community is not proof that a particular deal or counterparty is safe. Investors should still verify the information in front of them.
Levine Capital’s preferred-lender role does not mean automatic approval or an exception to documentation requirements. We focus on helping VIP clients navigate financing with attentive service and clear communication while keeping underwriting accountable.
As an AI tech-enabled lender, Levine Capital combines technology-supported organization with human review. Technology can help manage information; it does not turn an incomplete file into a verified one or guarantee that fraud will be detected.
What to Prepare Before You Submit a Deal
A clear file gives the review team a better starting point. Before submitting your scenario, organize:
- The purchase contract and all amendments, credits, and side agreements.
- Borrower-entity information and the identities of owners and authorized signers.
- Recent sale history and available evidence supporting improvements and value.
- Leases, occupancy information, and the basis for any projected rent.
- Every proposed source of funds, seller note, and additional repayment obligation.
- The business plan, expected exit, and any material risks or unresolved questions.
If a number is an estimate, label it as an estimate. If a document is missing, say so. If something changes, disclose the change. Clear communication helps prevent an otherwise workable deal from being undermined by avoidable inconsistencies.
Bring Us the Deal—and the Full Story
The private lending industry’s response to fraud should encourage better transactions, not discourage legitimate investors. Stronger risk intelligence, accurate documentation, and transparent creative financing can work together.
Levine Capital brings NPLA membership and industry Watchlist access, a preferred-lender role in SubTo and Owners Club, and a Morby Method- and Stack Method-friendly approach to that conversation. Our message is straightforward: creative financing deserves a complete, honest review.
Have a rental purchase, refinance, or seller-financed scenario to discuss? Submit Your Loan Scenario through Levine Capital’s Quick Quote, or book a call with our team.
Submitting a scenario starts the review process; it is not a financing approval or a commitment to lend. Financing and seller-second eligibility remain subject to underwriting, property and borrower eligibility, valuation, title, documentation, applicable restrictions, program availability, and final terms. This article is educational and is not legal, tax, or investment advice. Industry membership, preferred-lender status, and Watchlist access do not guarantee financing or eliminate risk.
References
The source material includes Realtor.com’s Baltimore report, the NPLA Watchlist announcement, the DOJ’s separate sentencing announcement, and Levine Capital’s creative-finance overview.
