Ponzi scheme points to risks in some common digital mortgage practices
A recent pyramid scheme highlights why mortgage lenders should keep an eye out for misrepresentation when reviewing electronic documents and signatures.
Brian Thomas Sapp, 38, of Culpepper, Va., collected $9 million based on claims he was using the money to flip lender-owned single-family homes with the supposed intent of generating returns for investors, according to documents filed in U.S. District Court for the Eastern District of Virginia.
Sapp, who previously lived in Alexandria, Va., was recently sentenced to nine years in prison after pleading guilty to one count of wire fraud and two counts of aggravated identity theft, according to a judgment filed March 29 in the case. All charges were classified as felonies.
Among industry practices misused in the scheme was the creation of a HUD-1 settlement statement cover letter purportedly obtained from a title insurance agency to affirm the supposed contract sale of a home.
"Sapp created a sophisticated set of interlocking false and fraudulent documents that included forged signatures of real persons who were the purported sellers and buyers of the properties," according to a statement of facts filed with the court late last year.
Sapp also misused a platform used to convey documents and signatures electronically to perpetuate the Ponzi scheme, court documents allege.
Sapp "did knowingly possess and use without lawful authority of identification of another person, to wit, the name and digital signature," according to court documents.
More than 20 victims, including families with special-needs children, lost almost $2 million collectively as a result of the fraud, according to a press release filed by the U.S. Attorney's office in the Eastern District of Virginia.