🤝 Florida's Most Wanted (Mortgage) Man

Happy Friday. This is the Shake 🤝 : The free 5-minute newsletter that doesn’t miss - almost like receiving an appraisal back at the EXACT purchase price.

Here’s what we've got for you this week:

• Florida’s Most Wanted (Mortgage) Man 🕵️ 

• Commercial Corner 🏢 : The Planet Fitness Franchise Model 🏋️ 

MARKET RADAR

FLORIDA’S MOST WANTED (MORTGAGE) MAN 🕵️ 

Get your popcorn ready because this is another one of those “Florida Man” tales.

Matthew Cox is a man of many tricks - almost like a modern-day Houdini 🤹‍♂️ 

Growing up in Florida, and attending university as an art major, Cox eventually desired to earn more income (as does every art major) and became a mortgage broker for a local Tampa firm in the early 2000s.

There he learned the best practices to get sub-prime mortgages approved for clients with little to no money, bad credit, and flakey job history. His manager demonstrated how loose the loan system really was and how to navigate underwriters and bankers with slightly falsified information to practically get any borrower approved.

Cox admittedly loved the feeling of swindling the banking system. Soon he became a top broker and started his own mortgage company.

Eventually, the party stopped when a younger broker that worked under Cox got caught committing fraud and wore a wire to expose his manipulations to the FBI.

He then got convicted and pleaded guilty - losing his mortgage license and being put on probation. They claimed Cox did $40M in bad loans in 2-3 years. This spawned his next move…

Instead of moving back in with his parents and declaring bankruptcy, Cox decides to step up his fraud game to earn more money. Fitting that his favorite movies are the Italian Job and Catch Me If You Can.

He begins to flip homes in a Tampa area that had a median home price of $50k-60k. Cox then comes to the realization that the buyers in this area aren’t reliable and making $20k per flip wasn't really worth it. 

He comes up with an idea 💡 to create his own synthetic buyers for his properties to start inflating the values. But to do this, he needed to get social security to issue social security numbers to people who didn't exist.

Cox’s uncanny ability to exploit loopholes led him to find that toddlers under 12 months didn't need to be present to get issued a social security card.

So he created fake IDs of parents along with falsified birth certificates and shot records for the toddler to obtain new social security numbers and open up credit cards. From there, all it took was 4-6 months of consistent payments, and poof - he had a 650-700 credit score for his fake buyer.

But the creativity didn't stop there. He wanted the houses to appraise higher so he could do a cash-out refi on them.

His girlfriend (who worked at a title company) demonstrated that if he paid extra money on the doc stamps, he could inflate the recorded sale price of the home from $50K to $150K+. To justify this, he sometimes told the title company that he wanted a construction credit for $100K added to the $50k sale.

On other occasions, he would even bring the documents himself to record at the local clerk’s office and change the paperwork beforehand plus overpay on doc stamps to lift the recorded sale price.

This all allowed him to essentially create his own market and fool appraisers into thinking homes that were worth $50k were actually now worth ~$150k.

He repeated this process until each of his fake buyers had 5 or more properties in the area. He would then refinance to pull out the cash and continue buying more.

The best part? His synthetic buyer names:

1. James Red

2. Brandon Green

3. Michael White

4. Lee Black

Ring a bell? All mimicking the names from Tarantino's Reservoir Dogs.

Cox still wasn’t done.

His next approach was to clear these loans by impersonating the lending company and forging documents that lenders send to county clerks to satisfy the mortgage.

Meaning he would appear to have 100% equity in these homes when a title company conducts a search. He smoothly explains just how simple the process is once you break it down:

1. He buys a house for $200k (gets a loan for $190K)

2. Creates a false satisfaction of the mortgage (the letter a bank sends to the county clerk saying Mr. White has paid off his loan)

3. Forges return address as one of his addresses (not the lenders)

4. He sends it to the local clerk to clear the mortgage from public records (doesn’t appear on the title report)

5. Gambles that nobody from the clerk’s office will actually call the lender to confirm (they just mail the confirmation letter back to his return address)

6. The title gets cleared and Cox can now go execute a refinance from another lender on this house

He claimed that he has taken out over $1M on one of his primary houses that was actually worth $200k through this method 🤑 

To double down on this, Cox would do something now known as shotgunning. 

When he satisfies the loan and clears the title, instead of applying for one refinance, he would simultaneously reach out to 4 or 5 lenders and apply for a loan. They all then lend him the money since the house appears to be owned free and clear.

How did they not notice this? It’s because the lenders all mail in the documents to the clerk so it takes time to record the note.

All the clerk does is record it. Cox admits that it definitely would appear odd to the worker at the clerk's office that there are multiple mortgages but hey, it’s not their responsibility and it’s not technically illegal.

The point is that at every closing he goes to, he walks away with a check for $150k. He’ll then go to the bank and slowly pull that out over 1-2 months.

Remember he did this all under false identities and would go on the run after grabbing the cash. So he would make $400k, $800k, or even over $1M on occasions through shotgunning on one house!

Estimates of the amount of money Cox fraudulently obtained range from $5 million to more than $25 million. He is believed to have fraudulently mortgaged more than 100 properties.

These unique schemes landed him on the United States Secret Service's Most Wanted list and eventually got him arrested on November 16, 2006. He was indicted on 42 counts and faced prison sentences of up to 125 years.

He plea bargained his sentence down to a maximum of 54 years on April 11, 2007, and was sentenced to 26 years on November 17, 2006. He was released from prison in July 2019.

There’s more meat on the bone 🦴 some other crazy tales of what Cox did:

1. Wrote a memoir for Efraim Diveroli (becoming the foundation for Jonah Hill’s character in the movie War Dogs) since they were in prison together. Cox didn't receive any credit and is in litigation with Diveroli & Warner Bros.

2. Took out a mortgage under the name of "C. Montgomery Burns" from the Simpsons 😂 

3. Stole identities from the homeless by posing as a survey–taking Red Cross worker to acquire their social security numbers

There really was no line that Cox wouldn’t cross.

Believe it or not, Mattew Cox had multiple occasions where he was confronted by bankers, sheriffs, and even in police custody yet somehow still got away scot-free due to his cunning ability to remain confident and talk himself out of situations.

In hindsight, Cox’s story exemplifies how the 2008 financial crisis came to be. Shady tactics exploiting loopholes in our lending system backed by unethical monetary incentives basically built up a house of cards waiting to be blown over.

If you got time today, listen to the full interview where he dives deep into stories and details of how he pulled this all off 👇️ 

COMMERCIAL CORNER 🏢 

THE PLANET FITNESS FRANCHISE MODEL 🏋️ 

There’s a one-of-a-kind business worth 7 billion dollars even though only 10% of its members showed up on any given day.

Despite the low attendance, Planet Fitness is loved by millions worldwide and has a franchise model that deserves to be studied.

The secret to Planet Fitness's success? They have a different approach to attracting customers compared to other gyms.

Instead of trying to impress fitness fanatics, Planet Fitness focused on the 80% of the population that was intimidated by the idea of going to the gym.

To make the gym experience less daunting, Planet Fitness implemented a few clever tactics.

Firstly, they made their membership as affordable as possible, with a monthly fee of only $10! Secondly, they made sure everyone felt welcome by installing a "lunk alarm" 🚨 to keep the grunts to a minimum, and by avoiding intimidating equipment like bench presses.

Planet Fitness is all about creating a judgment-free zone, where everyone could feel comfortable working out. This strategy paid off, and the average Planet Fitness gym earns a cool $1.6 million dollars in revenue. 💸 

The genius behind the Planet Fitness franchise model meant that not only do they earn recurring revenue from each gym, but they also sold purple equipment worth $140 million dollars to each franchisee!

And the best part? Franchisees have to upgrade their equipment every 5-7 years, meaning Planet Fitness has a never-ending stream of income.

Two fun facts about Planet Fitness:

1. They only lost 4 locations during the pandemic - showing their strength 💪 (pun intended)

2. Their first-ever franchisee, Shane McGuiness, sold his 114 locations back to corporate for a whopping $800 million dollars!

So, next time you're feeling intimidated about going to the gym, remember Planet Fitness and its commitment to creating a judgment-free zone for all (and making a sh*t ton of money along the way).

Thanks for reading! If you made it this far, don’t be selfish 🤝 share The Shake with a friend!

^{DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.}