New York Attorney General Eric Schneiderman filed a lawsuit against five defendants accused of running a rent-to-own housing scam that targeted first-time buyers with low credit offering them fraudulent no downpayment, no closing cost purchase loan options they would use to convince lenders they were paying off underlying mortgages—then pocketing the money.
If convicted they face up to 20 years in prison.
The 19-count indictment filed in Onondaga County Court includes various class C felony charges such as residential mortgage fraud, grand larceny, scheme to defraud and eight counts of falsifying business records.
Ring members: appraisers Steven Essig, 60, and Paul Sakowski, 44, both of Syracuse; attorneys Theresa Sanders-Hayes, 55, and Michelle Powers, 51; and mortgage loan processor Tracie Clark, 41, were arraigned on the indictment before Judge Anthony Aloi.
The investigation leading to the indictments revealed an elaborate scheme, the AG said.
The lawsuit accuses Sanders of purchasing dozens of dilapidated homes in and around Syracuse from the Department of Housing and Urban Development, obtained an appraisal that valued the property far more than what she paid “and then took mortgages out on each of the homes, usually in the names of her family members.”
It alleges the defendants used the new appraisals to refinance the loans in the names of the prospective buyers "even though these buyers had never before owned the homes they were refinancing," convincing lenders they were paying off underlying mortgages. Then they wired closing funds to their own accounts.
At the closings buyers were led to believe they had no choice but to carry two mortgages, including a second, undisclosed mortgage of $18,000 or more, that was controlled by the defendants who “used a variety of excuses to withhold from the buyers the deeds to the properties.”
In addition to causing hardships to unsuspecting homebuyers who could not demonstrate “they were the rightful owners of the properties,” said New York State Police Superintendent, Joseph D'Amico, fraudsters abused HUD-sponsored programs at the expense of mortgage lenders and American taxpayers who ultimately borne the additional risks placed on the FHA insurance program.