SAN DIEGO MORTGAGE BROKER PLEADS GUILTY TO $100 MILLION LOAN ORIGINATION FRAUD
FACTS
On April 25, United States Attorney Laura E. Duffy and Federal Housing Finance Agency Inspector General Steve A. Linick announced Mary Armstrong, an unlicensed mortgage broker who operated a nationwide loan origination fraud and kickback scheme from San Diego, pled guilty before United States District Judge John A. Houston to all five counts of an indictment charging her with wire fraud, money laundering and conspiracy. Armstrong was indicted on May 10, 2012, and apprehended in Las Vegas in July 2012; she has been held in custody since her arrest.
Armstrong admitted that she defrauded mortgage lenders by arranging for the sale of $100 million worth of real estate at inflated prices and then siphoned the overpayments to bank accounts she controlled. She created false loan applications on behalf of straw buyers and then arranged for her co-conspirators to create fake documents in support of those applications, including W-2 forms, paystubs, bank statements, and other records. According to Armstrong’s accountant and tax preparer, Audrey Yeboah, who pled guilty in October 2012 to participating in the same scheme, Armstrong collected over $14.5 million in kickbacks from the fraudulently obtained mortgage loans.
Armstrong joins Teresa Rose, a real estate agent; businessman Justin Mensen; and Yeboah, each of who has pled guilty to participating in the scheme. These defendants admitted that they carried out their scheme by recruiting investors through the Internet and advertisements in The LA Times and offering them the opportunity to purchase homes located in Southern California, Washington state, and elsewhere.
In reality, these so-called investors were nothing more than straw buyers who were promised $10,000 for each property purchased as part of the scheme. The defendants were able to secure mortgages for the properties by falsifying loan applications for the straw buyers, falsely claiming exorbitant income from fake employers and using fake W-2s and paystubs to support the claims. The defendants submitted these fraudulent loan applications to mortgage lenders to obtain 100 percent financing and thus avoided having to make any down payment on the properties.
They profited on these fraudulently acquired mortgage loans by inflating the purchase price of the properties by $100,000 (or more) and having the straw borrowers’ kickback to them the illicit proceeds. The conspirators claimed to lenders that the extra money would be used for construction improvements. In fact, the conspirators funneled the money to sham construction companies that they controlled, thereby concealing their kickbacks.
Armstrong admitted that after the conspirators collected the overpayments, the straw buyers defaulted on the mortgage loans, resulting in mortgage lenders and secondary purchasers, including Fannie Mae and Freddie Mac, suffering losses of up to $20 million.
Two additional defendants charged as part of the scheme, John Allen and William Fountain, are scheduled to begin trial on Nov. 5.
MORAL
San Diego now hit and hit again. See below. Next to go is Orange County. Remember if anyone has been involved in questionable loans over the past 10 years, see your attorney now. If you do not have one it is in your best interest to seek one now.
SAN DIEGO REAL ESTATE AGENT INDICTED FOR $5 MILLION MORTGAGE FRAUD
FACTS
On April 26, United States Attorney Laura E. Duffy announced that an indictment was unsealed charging Kathryn Sylvester on charges arising from a mortgage fraud conspiracy to submit fraudulent loan applications for various properties in San Diego County and elsewhere. Federal Bureau of Investigation agents arrested Sylvester earlier the same day. The indictment was unsealed and Sylvester was arraigned before Magistrate Judge William V. Gallo.
According to the indictment, beginning in 2005 and continuing up through 2008, Sylvester recruited others as straw buyers who would purchase properties by submitting mortgage loan application that misrepresented, among other things, their income and employment. Although Sylvester promised some straw buyers that she would flip a number of the properties for a profit, she systematically drained equity from the properties for her own benefit.
According to the indictment, in carrying out this fraud, Sylvester added straw buyers to unrelated bank accounts so they could inflate their supposed cash assets to the lenders. In this manner, Sylvester convinced lending institutions to fund loans for which Sylvester and the straw buyers would not otherwise qualify. The straw buyers included Claudia Montes, Tad Lent and Roderick Michener, all residents of San Diego.
As a result of her actions in the conspiracy, Sylvester is alleged to have played a role in the receipt of fraud proceeds from approximately 80 loans—loans that eventually went into default and resulted in the foreclosure of approximately 28 properties and losses of over $5 million to lenders.
Montes, a former notary public, notarized the signatures of other straw buyers on the loan applications. On April 12, Montes pled guilty to two-count information before Magistrate Judge William McCurine Jr. She admitted conspiring with Sylvester to submit false loan applications to lenders to obtain the properties, and transferring proceeds to Sylvester. She is scheduled to be sentenced before District Judge Janis L. Sammartino on June 28.
Michener pled guilty before Magistrate Judge Barbara L. Major on April 4 to conspiring with Sylvester to commit bank fraud. Michener admitted that he permitted co-conspirators to claim an ownership interest in his bank account in order to include the account as an asset on their respective mortgage loan applications. He also admitted transferring fraud proceeds to Sylvester. Michener is scheduled to be sentenced before District Judge Cathy A. Bencivengo on June 28.
Lent pled guilty to conspiring with Sylvester to submit falsified loan applications to mortgage lenders by misrepresenting the amount of his assets. Lent entered his guilty plea on Jan. 28 before District Judge M. James Lorenz. Lent is scheduled to be sentenced on Sept. 16.
MORAL
It really has not changed. If you had questionable loans you need to see your attorney now. Usually you get a visit about 7 a.m. in the morning by about two to four agents. You should say you want your attorney present as a matter of your constitutional rights. The agent will then give you a business card for the attorney to contact the office. The agents are generally very polite about this.
ORANGE COUNTY SUPERIOR COURT DISMISSES MORTGAGE FRAUD CHARGES BUT NEW ONES ARE FILED
FACTS
On May 1, charges against William David Robin stating he was involved in an $8 million grand theft and conspiracy were dismissed by an Orange County Superior Court judge. Prosecutors immediately filed 16 more charges of grand theft against him the same day according to a statement by Deputy District Attorney Pete Pierce.
The original charges were dropped because Robin's attorney, Jim Riddet, made a motion to have the charges against him thrown out based on an argument that the statute of limitations had run out.
The legal theory in the new charges is that Robin allegedly participated in completing false loan applications and the statute of limitations begins the date of the discovery, not the date of the alleged crime, Pierce is alleged to have said.
Two co-defendants, Christopher Allen Taylor and Agida Jamil, accepted a plea bargain offered by prosecutors, Pierce said. They made open pleas to misdemeanor grand theft and have agreed to testify against Robin, Pierce said. Taylor and Jamil will be sentenced after Robin's trial, Pierce said. Robin is scheduled to be arraigned on the new charges May 10.
Robin is accused of being the leader of a mortgage fraud scheme, that allegedly began in 2006, in which he, Jamil and Taylor marketed a "shared equity program" where buyers were told that if they paid half their mortgage payments to Pacific Vantage, the company would cover the other half, and after a few years, the buyer could buy out Pacific Vantage or sell the property and split the profit. Jamil and Taylor allegedly filled out loan applications for 16 homes showing inflated incomes for the buyers.
Pacific Vantage allegedly stopped paying the lender on the 16 homes starting in late 2007, but the customers continued to make payments to the company and eventually lost their homes, Pierce said. (OCDA and citiserv5113)
MORAL
What you should note here more than anything else is that there appears to be no statute of limitations on state prosecution for mortgage fraud since the statement is the “statute of limitations” does not start to run until after the fraud is discovered, not from when the act was completed. The implication here is that someone committing state mortgage fraud could be prosecuted at any time during the life of the person. If the district attorney does not discover the mortgage fraud for the next 15 years then the time to prosecute starts in 15 years?
CONNECTICUT ATTORNEY GETS 21 MONTHS FOR MORTGAGE FRAUD
FACTS
On May 2, David Kinney was sentenced by Senior United States District Judge Alfred V. Covello in Hartford to 21 months of imprisonment, followed by two years of supervised release, for participating in a mortgage fraud scheme and for making false statements to federal law enforcement.
Kinney, a New Haven-based attorney, participated in a mortgage fraud conspiracy in 2006 and 2007 by acting as the settlement agent in connection with fraudulent real estate transactions in New London County. As part of the scheme, Kinney submitted, or caused to be submitted, materially false HUD-1 settlement statements to lenders. In certain cases, Kinney released a disbursement check before he had received the down payment listed on the HUD-1.
On Nov. 5, 2007, in connection with the investigation of this matter, FBI special agents served Kinney a subpoena at his New Haven office. On that date, Kinney told agents that he had never given anyone a closing check prior to receiving the down payment money in connection with real estate closings that he handled when, in fact, he had done so on multiple occasions.
As part of his sentence, Judge Covello ordered Kinney to pay restitution in the amount $507,155.24 and to forfeit $65,749.59.
Kinney had pled guilty on Nov. 9, 2011, Kinney pleaded guilty to one count of conspiracy and one count of making a false statement. (usattyct5213)
MORAL
You would thing that as an attorney he would know better than to lie to federal agents. Better to say nothing at all, especially when you leave a paper trail. You would think as an attorney he would say I want my attorney present!
CHICAGO LOAN OFFICER SENTENCED TO 12 YEARS IN PRISON FOR MORTGAGE FRAUD
FACTS
On May 3, Fred Haywood, a former loan officer, was sentenced to more than 12.5 years in federal prison for engaging in a mortgage fraud scheme involving 65 real estate transactions which netted him personally more than $700,000. Haywood worked as a loan officer or processor for several different mortgage brokerages during the scheme, which occurred between 2001 and 2007.
Haywood was sentenced to 151 months in prison and ordered to pay more than $1.4 million in restitution to various lenders by U.S. District Judge Ronald Guzman. Haywood pleaded guilty in April 2012 to wire fraud. Haywood was the last to be sentenced among six defendants who were charged in 2008 and 2009 and subsequently pleaded guilty, and his was the longest term of incarceration.
Haywood’s fraudulent acts included qualifying borrowers for loans based on false information submitted to lenders, including false information about their income, assets, employment, intention to occupy the property, and source of down payment. He continued his fraudulent conduct after he was indicted and while on pretrial release.
During the scheme, Haywood and his co-schemers recruited buyers with good credit to purchase properties, knowing at the time that these buyers did not have sufficient income to qualify for mortgages, had no intention of actually living in the properties they were purchasing, and had no intention of fulfilling any long-term payment obligations on the loans they obtained.
Instead, he and others recruited the buyers by promising to pay them for acting as nominees and for putting the properties in their names. Haywood knew that the false statements and documents submitted to lenders were material to their decisions to make loans. (usqattyndil5213)
MORAL
Note the time lag. Fraud occurs over 12 years ago. Continues to six years ago. Sentenced now six years after latest event. As a rule the federal government has 10 years to indict you from the date of the last event in the fraud. Only then can one consider themselves safe and should consult their attorney immediately if involved in any questionable type activity related to federally insured loans or loans to be funded or purchased by governmental entities.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE. AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.
