Alabama prosecutors opened a trial this week against a woman accused of helping her brother run a sophisticated fraud that helped obtain millions of dollars in fraudulent mortgages from First Educators Credit Union in Birmingham and other lenders to finance condominium rehabs at the Gulf Shores resorts.
Melissa Gulledge, who acted as a buyer on several of the properties, is the only one of several defendants to take the case to trial. Prosecutors said the conspirators funded the home loans with undisclosed second mortgages that sucked the equity out of the properties.
To make the deals work, Gulledge allegedly negotiated seller-financed second mortgages, in which she agreed to make monthly payments directly to the sellers for a portion of the sales price. This would allow her to walk away from the closing table with tens of thousands of dollars more than her downpayment.
But prosecutors said the sellers often received only a small number of payments and that the mortgage companies ultimately foreclosed on the properties. Multiple sellers have filed lawsuits.
Prosecutors allege that Gulledge kept the second mortgages secret from First Educators, which loaned money to her for each of the four purchases cited in the indictment.
John Wheeler, the credit union's vice president, testified that his credit union would not have approved the loans had it known about the second mortgages.
A prominent local realtor, her son and daughter-in-law and two others have already pleaded guilty to the fraud that used "straw borrowers" to qualify for the loans. Other lenders victimized by the scheme were ABN AMRO, First Tennessee Bank, U.S. Bank, and First Choice Funding.
The realtor and other members of the conspiracy would arrange for a traditional mortgage while at the same time persuading owners of condominiums near the beach to extend special second mortgages, in which buyers would eventually pay a portion of the sales price directly to the seller.
