A Utah man pleaded guilty in federal court for his role in a multimillion-dollar mortgage fraud scheme that resulted in the illegal flipping of six properties and lender losses of approximately $2 million.
Raymond Morris pleaded guilty to wire fraud and bank fraud for participating in this scheme in 2006 along with co-conspirators Michael Hurd and Deborah Joyce.
According to the U.S. attorney’s office, the mortgage fraud scheme was based on properties in the Stonegate subdivision in Putnam County, W.Va. The three defendants’ scam involved illegal property “flipping” to out-of-state borrowers at inflated prices using a company called The Gift Program that was operated by Hurd.
Hurd described The Gift Program as a “seller-funded downpayment assistance program” used to provide homebuyer’s money to make downpayment and initial mortgage payments on real estate purchases. Hurd also admitted that he used The Gift Program to create an elaborate scheme to defraud lenders by concealing the transfer of loan funds to the borrower from the lender.
In essence, through the use of The Gift Program, lenders unwittingly funded their own downpayment and made the initial mortgage payments for these properties.
As part of the scam, Joyce obtained inflated appraisals from two local appraisers—James Thornton and Mark Greenlee—and subsequently sent the appraisals to Morris in Utah.
Morris admitted that he then identified Utah investors to purchase the Stonegate properties at fraudulently inflated prices, while claiming that the properties were significantly undervalued. According to his guilty plea, Morris said he then got those investors in contact with Hurd, who used The Gift Program to conceal the transfer of the loan proceeds to the investor from the lender.
Last November, Hurd admitted in his plea that he wired additional loan funds to the investor during the scheme to make initial mortgage payments. Once those funds ran out, the investors defaulted on the loans and the properties went into foreclosure.
The defendants illegally flipped a total of six properties in the Stonegate subdivision. Lenders lost almost $2 million as a result of this scheme.
Meanwhile, Morris and Hurd orchestrated a similar investment-type scheme at the same time in Modesto, Calif., in which 20 properties were flipped with losses in excess of $5.5 million.
In their upcoming sentences, Hurd faces up to 60 years in prison and a $2 million fine, while Morris can go to jail for 30 years and pay a $1 million fine.
Joyce was already sentenced in April 2011 and is serving four years in prison for her involvement in this scam.
