ARIZONA LAW PROFESSOR STATES IT IS NOT IMMORAL TO 'WALK AWAY' FROM A MORTGAGE HOME LOAN
FACTS
Arizona law professor Brent White says the only thing standing between many "underwater" homeowners and a better financial future is a misguided sense that walking away from a loan commitment is morally wrong. White, an associate professor at University of Arizona's James E. Rogers College of Law, has spent the past few months presenting his argument to other lawyers, real-estate professionals and the national media.
White argues that underwater homeowners, those whose unpaid loan balance exceeds the value of their home, are being manipulated into picking up the tab for a real-estate crash that borrowers and lenders created equally. White does argue that banks might be more inclined to lower the principal balance on inflated home loans if more borrowers did just that.
Despite all of the attention strategic default has received, statistics indicate that only a tiny fraction of the country's more than 5 million homeowners whose loans are upside-down have stopped making payments by choice.
White said his primary aim is to give borrowers a rational alternative to the rhetoric of guilt and shame coming from financial leaders and politicians, which labels a practice that is perfectly acceptable in the business world as immoral and irresponsible if tried at home.
His discussion paper, titled "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis," points out that lenders and other businesses are not saddled with the same moral constraints that would prevent most individuals from defaulting by choice.
"It's a double standard that says corporations can look out for their best interests, but individuals can't," White said in an interview. A number of metro Phoenix real-estate professionals said they see merit in White's argument that lenders should meet borrowers halfway by writing down a portion of upside-down loan balances, but they were far less comfortable with the notion that strategic default is a valid solution to the housing problem.
White noted that his argument is not merely a philosophical one, and that there actually is a solid legal basis for his conclusion that it's OK to walk away.
A legal concept known as "efficient breach" holds that it is ethical to breach a contract in cases where the ramifications for doing so are less harmful to the party than adhering to the contract would be.
Non-deficiency statutes such as the ones in Arizona and California essentially say that lenders trying to collect on an unpaid mortgage loan have a right to foreclose on the home but cannot pursue any other legal claim against the former borrower.
For instance, the lender can't sue for the difference between the original loan value and the proceeds from a foreclosure sale of the home.
The reason it's called a "non-deficiency" statute, Loeb said, is that it establishes default and subsequent foreclosure as a valid means of fulfilling a mortgage contract, as opposed to being a breach of contract in which one party's actions are considered "deficient." (azrep1312010)
MORAL
Much can be said for the above article of which this is just a paraphrase and not the complete article or paper. However, there are some misconceptions in the article that do need comment. One is a lender, at least in California, can judicially foreclose as opposed to nonjudicially where the loan is a refinance and not the original purchase money mortgage. Doing this allows that same lender to chase the borrower for any deficiency in one year. Then there is the case of the second mortgage. If the borrower walks away and the second mortgage is from a different lender and was not used to buy the property, the second mortgage is a "sold out junior" and can sue on the promissory note after the foreclosure on the first mortgage is completed. Before I would recommend a "strategic default" I recommend strongly the borrower consult with experienced legal counsel to be sure they do not fit in one of the "exceptions" where they can still be sued. As an aside we have several cases where that is exactly what happened and the holder of the second mortgage sued the borrower whom we had to defend.
SO YOU THINK THE FBI IS NOT GOING TO INCREASE ITS INVESTIGATION ON EXISTING FRAUDULENT LOANS DONE OVER THE PAST 10 YEARS
FACTS
The Federal Bureau of Investigation is hiring 3,450 new employees in 2010. It is looking to fill 900 special agent and 2,550 non-agent positions -- from intelligence analysts to cyber experts, from scientists to accountants, from translators to engineers. (fbistlouis12610)
MORAL
I have been warning you about this all along. So there are no surprises. Look for more arrests in 2010 and especially in 2011.
HUD/FHA GETS TOUGHER AND TOUGHER ON APPROVED MORTGAGEES
FACTS
The Federal Housing Administration is moving more quickly with fines and suspension. It recently accused Equitable Trust Mortgage Corp., a Baltimore lender, with charging borrowers excessive origination fees and on Dec. 9, 2009 immediately suspended the company's FHA lending privileges. A few days later, Equitable entered into a settlement with the Department of Housing and Urban Development, agreeing to pay $277,000 in fines and reimburse 37 borrowers. As part of the settlement, HUD reinstated Equitable Trust Mortgage as a FHA approved lender.
A month ago FHA suspended Lend America of Long Island for violating its underwriting guidelines. But unlike Equitable, Lend America did not settle and is now out of business, the subject of investigations by both HUD and the Department of Justice.
HUD suspended at least seven lenders in 2009, including Lend America (a top 20 ranked GNMA issuer), Taylor, Bean & Whitaker (a top 10 ranked national lender) and five other firms. In addition, HUD's Mortgagee Review Board withdrew FHA approval from 270 other lenders.
Suspensions are temporary enforcement actions whose immediate goal is to halt a lender from making more loans. The lender has a chance to appeal and convince HUD that the suspension should be lifted. Withdrawal of FHA approval is permanent and happens once all appeals have been exhausted.
Secretary Shaun Donovan stated that HUD is working with DOJ and other federal and state enforcement agencies to combat mortgage fraud.
Congress recently passed an appropriations bill that provides HUD with $20 million in new funds to investigate and stop mortgage fraud. The appropriators also increased the HUD Inspector General's budget by $5 million with instructions to audit more FHA lenders. Inspector General auditors often elect FHA lenders with high early default rates for review. (bkruniv12610)
MORAL
I have been telling you for years to watch the HUD Comparison Ratio. It is a warning bell to you that lets you know to increase quality control and to audit the files. When you do not do it, this is what occurs. If you have a Comparison Ratio approaching or exceeding 200%, get us in there now to audit you so we can help you reduce it. This is a lot better and a lot less expensive than getting a HUD suspension letter asking you if you want an informal conference before HUD suspends your approval.
HUD/FHA PERMANENTLY WITHDRAWS LENDING APPROVALS FROM PREMIUM CAPITAL FUNDING DBA AS TOPDOT MORTGAGE
FACTS
The Federal Housing Administration on Monday, Jan. 25, 2010 permanently withdrew lending approvals from Premium Capital Funding of Long Island with a government 'claim and default' rate approaching 13% and compare ratios exceeding 200% in 48 HUD field offices. Premium also does business as TopDot Mortgage. FHA also ended the firm's ability to continue servicing Ginnie Mae securities, transferring TopDot's $181 million dollar portfolio of receivables to LoanCare Servicing Center. HUD's Mortgagee Review Board suspended TopDot, citing its "numerous and egregious violations of FHA requirements, including failure to document borrowers' income, evaluate borrowers' creditworthiness, and approving loans with grossly excessive debt-to-income ratios. FHA also fined the company $674,000. (nmn12610)
MORAL
Be my guest and do not look at the comparison ratios. Then retain us to try to save your HUD approval. It really is better to have us come and audit you first before HUD. And in this case a heck of a lot cheaper.
HUD/FHA TERMINATES THREE MORE LENDERS AND SUSPENDS A FOURTH FOR NOT COMPLYING WITH HUD RULES
FACTS
On Jan. 25, 2010 the Federal Housing Administration's Mortgagee Review Board announced that it is immediately and permanently withdrawing the FHA approval of three mortgage lenders and is suspending a fourth. The MRB withdrew the FHA approval of Strategic Mortgage Corp., ProMortgage Inc., and Americare Investment Group Inc. Additionally, the MRB has suspended the FHA approval of Home Mortgage Inc. of Burr Ridge, Ill.
The withdrawal actions will permanently prevent Strategic, ProMortgage and Americare from participating in FHA programs while the suspension of HMI will apply for a minimum of six months or until a federal court rules in a related matter (see below). The MRB took these actions based upon the following serious violations of FHA requirements:
Strategic (based in Oklahoma City, Okla.) failed to comply with employment requirements, charged borrowers impermissible or excessive fees, failed to disclose all fees on the Good Faith Estimates, and submitted a false certification to HUD in connection with an application for FHA insurance. The MRB also voted to seek a civil monetary penalty from Strategic in the amount of $71,000.
ProMortgage (based in Claremore, Okla.) failed to adopt and maintain a quality control plan, failed to perform quality control reviews of loans that went into default within six months after closing, engaged in a prohibited branch arrangement, made false certifications on the HUD/VA Addendum to the Uniform Residential Loan Application, failed to comply with home office operation requirements, and failed to report employee compensation on the appropriate form. The company allowed borrowers to provide verification of employment directly to the lender, which creates an opportunity for manipulation, or falsification of documents submitted. Verification of employment must be submitted directly to the lender by the employer. The MRB also voted to seek a monetary penalty from ProMortgage in the amount of $124,000.
Americare (based in Arlington, Texas) breached the terms of a settlement with HUD by failing to make any of the required monthly payments. On Oct. 8, 2009, the Board entered into a settlement with Americare requiring the company to pay a monetary penalty of $124,000 and placing it on probation for a period of six months. Since then, Americare failed to make a single monthly payment as required under the terms of the earlier agreement.
HMI retained its part owner and chief executive despite his indictment and subsequent guilty plea for bank fraud. In June 2009, Lawrence A. Luckett (according to U.S. Attorney's Office press release) was indicted in the U.S. District Court for the Northern District of Illinois, Eastern Division for his role in a scheme to obtain money for 450 fictitious residential mortgage loans; a guilty plea was entered in this matter on Jan. 15, 2010. HMI failed to notify HUD of this indictment as required. Additionally, HMI failed to comply with FHA's annual recertification requirements.
In addition to these sanctions, the Mortgagee Review Board also took action against the following lenders:
Action Mortgage Corp. of Cranston, R.I. was placed on probation for a period of six months due to its misleading advertising practices. The Mortgagee Review Board also voted to impose a monetary penalty in the amount of $7,000.
Cooper and Shein LLC (doing business as Great Oak Lending Partners) of Timonium, Md. was placed on probation for a period of six months due to its misleading advertising practices. The Mortgagee Review Board also voted to impose a monetary penalty in the amount of $11,000.
While these lenders may appeal the Board sanctions by submitting a written request for a hearing before an Administrative Law Judge within 30 days, the filing of an appeal does not delay these actions. Complaints seeking these civil money penalties will be served upon Strategic, ProMortgage, Action Mortgage and Cooper and Shein in due course and the lenders will have the opportunity to contest the imposition of the penalties before an Administrative Law Judge. (hud 10-019, 1-25-2010)
MORAL
Except for one of the first four, the other three had Compare Ratios of over 200%.
CALIFORNIA APPRAISERS' LICENSE IS ON THE LINE
FACTS
An administrative law judge is expected to issue a ruling within a month on whether Kirksey J. "Mark" Newton Jr. will lose his appraiser's license. A hearing on the matter began earlier in January 2010 in Bakersfield and closing arguments concluded in Los Angeles.
The California Office of Real Estate Appraisers is attempting to revoke Newton's license after scrutinizing eight property appraisals he either performed or signed off on, including work done for Tower Lending, the mortgage brokerage arm of Crisp, Cole & Associates.
The state says Newton's property valuations for Tower and other clients were riddled with errors and omissions, and often were derived from information about sales that were not comparable to the property being examined.
Newton owns San Joaquin Appraisals. He says he stands by six of the reports at issue, and did not write the remaining two reports. His electronic signature was misappropriated by a subordinate, Newton testified.
The case is before Judge Samuel Reyes, who is expected to make a decision within 30 days. (bkrsfldca1282010)
MORAL
Even if he is right, his name has been besmirched. Additionally, the judge's opinion is usually advisory and the commissioner can override it pursuant to regulations.
WHEN THE LENDER FAILS TO RECORD THE DEED OF TRUST IN CALIFORNIA AND THE BORROWER THEN FILES BANKRUPTCY THE LENDER IS NOW AN UNSECURED CREDITOR
FACTS
Where a borrower files a voluntary chapter 7 bankruptcy and listed a lien related to an unrecorded deed of trust in her schedules, but not in her petition, the trustee did not have constructive notice of the lien "as of the commencement of the case" and could exercise 11 U.S.C. Sec. 544(a)(3)'s "strong-arm power" as a bona fide purchaser for value to avoid the lien. Equitable subrogation did not apply because the creditor whose debt the lien holder paid off itself had no lien, having discharged it by a recorded deed of reconveyance; enforcement of the right to subrogation would injure a party holding legal title and an equal equity, the trustee, and California courts give priority to a bona fide purchaser over one claiming equitable subrogation. (In re Deuel - filed January 28, 2010, 07-55266)
MORAL
Now, you might ask how does this help me Mr. Thordsen if I file bankruptcy, since I will not get the money back either way. Think about this? You now have as one of your creditors, the Internal Revenue Service to whom you owe a lot of money. Income taxes are not normally discharged in bankruptcy (There are exceptions to this rule which we use in your favor if you quality.) Now a creditor forgets to record a mortgage for $250,000. That creditor is unsecured normally at the time you file bankruptcy which means if the trustee in bankruptcy sells your house, the $250,000 is not paid from the proceeds. That leaves $250,000 from the sale minus your homestead interest (up to $150,000) depending on your age and family status and the residents of the home at the time of foreclosure and if you recorded the homestead. The trustee now pays the unsecured creditors in order of priority and taxes have a priority. Your income taxes get paid off and you have a fresh start and no income tax debt to follow you. This is an oversimplification but you get the idea.
BALOD PLEADS GUILTY TO MORTGAGE FRAUD IN FRESNO
FACTS
On Jan. 25, 2010 Megan Balod, sister-in-law of former Realtor David Crisp, pled guilty to a series of federal charges as part of an ongoing real estate fraud investigation. She pled guilty to four felony counts of wire fraud before Fresno Federal judge Oliver Wanger and is scheduled to be sentenced July 12. She faces 20 years in prison on the wire fraud charge, and a fine of $250,000.
Balod's parents, Kevin and Leslie Sluga, pled guilty to similar charges Jan. 8 in the same courtroom.
Prosecutors indicated then the Slugas' plea deal was part of a package that would require Balod to plead guilty to charges filed against her.
Between May 2004 and May 2006, Balod bought 11 homes worth $5.4 million at the direction of one of the owners of Crisp and Cole Real Estate, the filing indicates. Balod lied on loan documents about her employment and income for almost all of the properties and when she failed to make payments, the lenders lost $851,000, investigators said.
A fourth person, Jerald Teixeira, pleaded guilty Sept. 2008 to one count of bank and wire fraud. Teixeira was a loan officer for Tower Lending, which was operated by Crisp and Cole Real Estate.
No criminal charges have been filed against the firm's principal owners David Crisp and Carl Cole, though state regulators have stripped the duo of their real estate licenses.
As part of their plea deals, Balod, the Slugas and Teixeira have agreed to cooperate with authorities and testify in court if asked. (kget.com12510)
MORAL
Is anyone giving odds as to whether Crisp and/or Cole will or will not be indicted?
FORMER CALIFORNIA APPRAISER GETS THREE YEARS IN FEDERAL PRISON FOR $46 MILLION MORTGAGE FRAUD
FACTS
On Jan. 29, 2010, Lila Rizk of Rancho Santa Margarita, Calif., a former state-licensed real estate appraiser was sentenced to three years in federal prison and ordered to pay more than $46 million in restitution, for her role in a massive mortgage fraud scheme that caused tens of millions of dollars in losses to federally insured banks. She received the three-year prison term after her conviction last summer on conspiracy, bank fraud and numerous loan fraud charges.
Rizk was sentenced by U.S. District Court Judge Dean D. Pregerson, who warned that other professional real estate appraisers should know if they inflate appraisals and lie about the value of homes, "there is an overwhelming likelihood that they will be caught and go to prison."
The evidence presented at Rizk's trial last summer showed that she was part of a wide-ranging and sophisticated scheme that obtained inflated mortgage loans on homes in some of California's most expensive neighborhoods, including Beverly Hills, Bel Air, Holmby Hills, Malibu, Carmel, Mill Valley, Pebble Beach and La Jolla. Members of the conspiracy sent false documentation, including bogus purchase contracts and appraisals, to the victim banks to deceive them into unwittingly funding mortgage loans that were hundreds of thousands of dollars more than the homes actually cost. Lehman Brothers Bank alone was deceived into funding more than 80 such inflated loans from 2000 into 2003, resulting in tens of millions of dollars in losses.
The evidence showed that Rizk profited by collecting hundreds of thousands of dollars in fees for providing inflated appraisals in the scheme. Her appraisals typically valued the homes three times higher than what the homes really cost. In order to supposedly justify these inflated values, Rizk used comparable homes, that were far bigger, more luxurious, and in better neighborhoods than the homes she appraised. Once she had inflated a few dozen homes, she then used those homes as comps to supposedly justify inflated prices for homes later in the scheme.
There are 10 other real estate professionals convicted of charges relating to this scheme, including:
* Scheme leader Charles Elliott Fitzgerald, a developer formerly of Newbury Park and Beverly Hills, who previously was sentenced to 14 years in prison;
* Mark Alan Abrams, of Los Angeles, a mortgage broker who along with Fitzgerald orchestrated the scheme, who is scheduled to be sentenced on April 12;
* Nicole LaViolette, of Palm Springs, a loan processor, who is scheduled to be sentenced on June 14;
* Jamieson Matykowski, of Laguna Niguel, who found houses for the scheme, is scheduled to be sentenced on March 29;
* Timothy Holland, of Santa Ana, an escrow officer, who is scheduled to be sentenced on July 19;
* Richard Maize, of Beverly Hills, a mortgage banker, who is scheduled to be sentenced on June 28;
* Thomas R. Schiff, of Brentwood, a mortgage banker, who was previously sentenced to six months in prison;
* L. Scott Robinson, of Dana Point, an appraiser, who is scheduled to be sentenced on April 2;
* Kyle Grasso, formerly of Santa Monica, a real estate agent, who is scheduled to be sentenced on Feb. 19; and
* Joseph Babajian, of Los Angeles, a real estate agent, who is scheduled to be sentenced on Feb. 22. (usattycdca12910)
MORAL
Please notice the following: the government went back to loans that occurred over 10 years ago. Loan processors were indicted for doing the documents and the judge said they are going after the appraisers that overstated the value by using the wrong comps to start with and then using the inflated comps to justify new purchasers.
INDIANA WOMAN GETS 71 MONTHS IN FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
On Jan. 27, 2010 Donella Locke of Indianapolis was sentenced to 71 months in prison by U.S. District Judge Larry J. McKinney following her conviction at trial for wire fraud. This case was the result of a several year investigation by the Hamilton County Sheriff's Office, Hamilton County Prosecutor's Office, Indiana Attorney General's Office-Homeowner Protection Unit, United States Trustees Office, Region 10, Federal Bureau of Investigation and other members of the Southern Indiana Bankruptcy Fraud Working Group.
From 2004 through 2006, Locke engaged in a series of fraudulent real estate transactions either in her capacity as a real estate broker or an investor. The real estate transactions concerned high dollar homes. For five properties, Locke used a false social security number to the lender, and generated false verifications of employment, false verifications of rent, used false business names, submitted false income amounts, and used names of people she knew without their permission on false residential leases submitted to lenders. For other properties, Locke represented that repair and rehabilitation work would be done to the properties which was never done. The false statements to the lenders resulted in them lending moneys they would not have otherwise loaned. Locke used several lenders and several mortgage brokers, most of whom did not know of the existence of the other fraudulent transactions.
Judge McKinney also imposed two years supervised release following Locke's release from prison. During the period of supervised release, she must provide her financial information to her probation officer as she was ordered to make restitution of $2.3 million to 13 lenders. (usattysdin1272010)
MORAL
Did you notice there were FIVE cooperating law enforcement agencies? Remember in prior e-alerts I explained the Mortgage Fraud Task Force being set up about 1-1/2 years ago? Now do the math.
PRIESKORN ARRESTED IN FLORIDA FOR ONE OF MINNESOTA'S LARGEST MORTGAGE FRAUDS
FACTS
On Jan. 26, 2010 nearly three years after Michael Anthony Prieskorn disappeared, he was arrested in Florida and accused of orchestrating one of Minnesota's largest mortgage frauds. Authorities said Prieskorn received more than $5 million from investors who bought some 70 homes in Minnesota and Florida.
In an indictment Prieskorn and Richard Mathew Laho of Buffalo, each were charged with 23 counts of wire fraud, one count of mail fraud and one count of conspiracy to commit wire fraud.
Each could face up to 20 years in prison on each wire fraud count.
U.S. prosecutors said Prieskorn and Laho lured people with good credit to buy homes as investments during the height of the housing boom. The investors were told that companies run by the duo -- Blackstone Sales and Maine Estates -- would make the monthly mortgage payments and sell the properties about nine months later. For their trouble, investors would get $5,000 for making each purchase and wouldn't have to pay any other costs.
Prieskorn and Laho helped out the people doing the actual buying by temporarily depositing money into their bank accounts, making them look creditworthy for the mortgages they were taking on. After each closing, Prieskorn purportedly received a portion of the loan proceeds as "management fees." The fees ranged from $18,000 to $228,000 per property and totaled more than $5 million for the 70 properties that are the focus of the indictment.
Investors eventually learned Prieskorn was not making mortgage payments, and many short sales and foreclosures occurred, damaging investors' credit. Affected properties were scattered across the Twin Cities, from Eagan and Albertville to Elk River and Buffalo.
Prieskorn and Laho will be prosecuted in Minnesota. Although the unsealed indictment focuses on 70 deals, an investigation by the Minnesota Department of Commerce has identified 220 sales in Minnesota and Florida using the "builder bailout scheme" that involved Prieskorn. In April 2009 the department revoked Prieskorn's mortgage originator license and fined him $2.2 million.
While the mortgage-fraud scheme Prieskorn and Laho are accused of engineering could be the largest yet in Minnesota by number of properties, there is competition for the title when it comes to total dollar amount. In 2008, Thomas J. Balko and Jonathan E. Helgason, co-owners of TJ Waconia, pleaded guilty to a three-year scheme that involved 162 properties and $35 million in mortgages. They made some $14 million on the resale of houses sold to straw-man investors. (twnciti.com12610)
MORAL
We have been representing a few of the people involved in some of these schemes. Did you ever notice in the ones we publish there seems to be a common thread? They make all these "millions" and yet when caught cannot afford to hire private counsel? You would think they would use their "smarts?" to save something for a rainy day.
MINNEAPOLIS WOMAN GUILTY OF MORTGAGE FRAUD
FACTS
On Jan. 28, 2010, Susan E. Newall was found guilty on 12 counts for her part in a $2.8 million mortgage fraud ring. Her 2008 trial on the same counts ended in a mistrial. Her partner, Edward L. Boler, pleaded guilty in May to one count of racketeering and one count of theft by swindle.
The prosecution grew out of an arson finding by county investigator Glen Miller after a house burned in 2007 in Brooklyn Center. Miller found that the property was one of six in foreclosure and one of seven that had been purchased in a short time by Brian White. That led investigators to Demetrius Winston, who bought five properties in a two-week period. They say that Newell, 39, recruited the buyers and that Boler obtained mortgage loans based on fraudulent applications. Newell, Boler and each buyer split the proceeds resulting from obtaining a mortgage greater than the property's cost, according to the complaint.
Prosecutors charged that Boler and his U.S. Mortgage Investments Richfield fraudulently obtained loans totaling $2.8 million on 12 properties, eight of them in Minneapolis and one each in Richfield, St. Paul, Champlin and Brooklyn Center. (strtrib.com1282010)
MORAL
You know the old proverb. If at first you don't succeed, try, try again. So the government tried again and got a guilty verdict.
SIX PEOPLE INDICTED IN CINCINNATI FOR $6.7 MILLION MORTGAGE FRAUD
FACTS
On Jan, 29, 2010 the Greater Cincinnati Mortgage Fraud Task Force has caused a seven-count indictment charging two Cincinnati area home builders, a former Huntington National Bank vice president, and a self-employed tax preparer and interior designer with participating in a mortgage fraud scheme to sell four high-end luxury properties to "straw buyers."
The grand jury returned charges against:
Eric D. Duke, Newport, Ky., a self-employed tax preparer and interior designer. He also owned a property management company called Rivendale Property Management Group L.P., in Maineville, Ohio.
Terrence J. Monahan Jr., Cincinnati, formerly with Huntington National Bank.
Bernard J. Kurlemann of Mason, owner of Kurlemann Homes of Long Cove and Long Cove Management LLC.
Bryan Sanneman of Mason, owner of Sanneman Homes, Inc.
The charges stem from the sale of four residential properties in 2006 to 2007, three of which were sold for approximately $2 million each. The indictment alleges that Monahan, Sanneman, and Kurlemann, each conspired with Duke to defraud lenders involved with the sales.
The scheme, as alleged in the indictment, involved Duke locating two people willing to buy the properties in name only and let their names be used on loan applications. The indictment alleges that Duke worked with a mortgage broker who submitted fraudulent loan applications that contained false income and assets. According to the indictment, Monahan gave Duke a customer bank account statement to be used as a "go-by" to create fictitious account statements to support fraudulent assets on the loan applications.
The indictment also alleges that Sanneman and Kurlemann provided documentation to the lenders falsely stating that they had received down payments from the borrowers when they had not. The indictment alleges that the defendants conspired with Duke to have the fraudulent loans approved in order to sell their properties.
The indictment charges all four defendants with conspiracy. Duke and Monahan are charged with conspiracy to commit wire fraud and wire fraud, both crimes punishable by up to 20 years' imprisonment.
Duke and Kurlemann are charged with conspiracy to commit loan fraud, punishable by up to five years' imprisonment, and two counts of loan fraud. Each count of loan fraud is punishable by up to 30 years' imprisonment.
Duke and Sanneman are charged with conspiracy to commit loan fraud and loan fraud.
Loan proceeds from the alleged fraud totaled approximately $6.7 million.
Charges have been filed separately against the straw buyers. Francisca Webster of Cincinnati has been charged in a separate information, with conspiracy to commit wire fraud punishable by up to 30 years' imprisonment. Christopher Gagnon of Florence, Ky. has been charged with loan fraud, punishable by up to 30 years' imprisonment. (USATTYSDOH12910)
MORAL
Even the straw buyers were indicted in this one.
FATHER AND SON AND TWO OTHERS SENTENCED IN DAYTON, OHIO FOR MORTGAGE FRAUD
FACTS
On Jan. 22, 2010, four participants in an extensive mortgage fraud scheme that affected 210 residential properties were sentenced in federal court by U.S. District Judge Michael R. Barrett.
Edward McGee was sentenced to three years' probation and fined $140,000. Edward McGee pleaded guilty on May 11, 2009 to one count of conspiracy to commit money laundering.
His son, Kenneth O. McGee, was sentenced to 32 months in prison and fined $12,500. Kenneth McGee pleaded guilty on May 11, 2009 to one count of conspiracy to commit mail fraud, wire fraud, and money laundering, and one count of conspiracy to commit money laundering.
Robert Mitchell, Vandalia, was sentenced to 32 months in prison and fined $12,500. Mitchell pleaded guilty on March 11, 2009 to one count of conspiracy to commit mail fraud, wire fraud' and money laundering, and one count of conspiracy to commit money laundering.
Kamal J. Gregory, 36, Centerville, was sentenced to 10 months in prison and fined $12,500. Gregory pleaded guilty April 14, 2009 to one count of conspiracy to commit mail fraud, wire fraud' and money laundering, and one count of conspiracy to commit money laundering.
These cases stem from a 13-count indictment involving six defendants. The four sentenced above were part of a conspiracy that operated and controlled various Dayton-based real estate mortgage and title insurance related businesses and corporations that schemed to defraud 33 mortgage lending institutions out of over $7 million in loan proceeds and other things of value. This scheme involved arranging, facilitating, and manipulating documents associated with real estate sales and closings in order to fraudulently obtain excess mortgage loan proceeds generated from the sale of residential properties for the personal benefit of the co-conspirators.
Two others involved in the scheme were previously sentenced. Julian M. Hickman, formerly of Centerville and now living in East Cleveland, pleaded guilty on Dec. 15, 2008 to conspiracy and tax crimes. Hickman was sentenced on Dec. 10, 2009 to 33 months' imprisonment. Jessica A. Zbacnik, of Monroe, pleaded guilty on July 29, 2009 to one count of conspiracy to commit money laundering and one count of conspiracy to commit mail fraud, wire fraud, and money laundering. She was sentenced on December 3, 2009 to 30 months' imprisonment. (usattysdoh1222010)
MORAL
Note how the federal people are demanding higher sentences because of the fallout. If you have been involved, see your attorney now before law enforcement sees you later. Presuming the attorney is knowledgeable in real estate and mortgages, there are legal mitigating factors that can be brought into play to protect you.
HILLIARD, OHIO ACCOUNTANT PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
A Hilliard accountant pleaded guilty Jan. 21, 2010 in U.S. District Court to conspiring to commit mortgage fraud, money laundering, and obstruction of justice. Dennis G. Sartain, the accountant for co-defendant Thomas Parenteau, pleaded guilty to one count of conspiring to defraud the United States by impeding and impairing the IRS, one count of conspiring to commit money laundering, and one count of conspiring to obstruct justice.
Bonnie Helt-Adams of Dublin, a real estate agent for Parenteau, pleaded guilty on the same date to one count of conspiring to commit bank and wire fraud, and one count of conspiring to obstruct justice.
U.S. District Court Judge Michael Watson has not scheduled a sentencing date. Sartain faces a maximum sentence of 30 years in prison and a maximum fine of $1 million, or twice the monetary loss or gain from the offense. Helt faces a maximum sentence of 35 years in prison and a maximum fine of $1.25 million, also twice the monetary loss or gain from the offense.
Parenteau, of Columbus, is scheduled to begin trial March 8 in U.S. District Court in Columbus.
Sartain, Helt, and Parenteau were charged in April 2009 with tax fraud, bank and wire fraud, money laundering, and obstruction of justice in a superseding indictment. (one man's interpretation = did not want to make a deal on the original, so the federal prosecutors added more charges to make the risk greater of spending a greater amount of time in prison.)
According to the indictment and statements made at the plea hearing, Sartain conspired with Parenteau and others to file false individual income tax returns for Pamela McCarty with the IRS for the tax years 2000 through 2003. These four tax returns falsely reported substantial losses and generated tax refunds from the IRS and the state of Ohio in excess of $800,000, investigators said.
According to the indictment and statements made at the plea hearing, Sartain conspired with Parenteau, McCarty and others to prepare a $4.5 million fictitious loan application to refinance and improve a 30,000-square foot residence. As a result of the fraudulent loan documents, McCarty obtained nearly $4.5 million from one bank, and an additional $1.5 million from a second bank, and she transferred the money to Parenteau.
On Jan. 31, 2007, Parenteau and his wife refinanced the 30,000-square foot residence, at 4500 Dublin Road in Dublin, known as Loretta Estate. They received a $12 million loan, which was used in part to pay off McCarty's existing obligations at the two banks, investigators said.
According to the indictment and to statements made at the plea hearing, Helt admitted that from 2005 through 2007, she, Parenteau, and others negotiated and participated in real estate deals in which they sold luxury homes for a falsely inflated purchase price from the builder in exchange for an undisclosed or disguised kickback.
According to the indictment and to statements made at the plea hearing, both Sartain and Helt admitted to conspiring with Parenteau and others to obstruct the IRS criminal investigations of Sartain, Parenteau and others. Sartain and Helt admitted to altering or destroying records as well as lying to federal and local law enforcement agents. (colomboh1272010)
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