GREENBELT, Md. -  Authorities Tuesday arrested a Maryland man in what the Department of Justice called a massive mortgage fraud scheme that left victims homeless.

Rolando Alonzo Cousins, 31, of Bowie, Md., was indicted Monday on charges of conspiracy to commit mail fraud, mail fraud and money laundering, the Maryland U.S. Attorney’s office said in a news release. Prosecutors said the alleged scheme involved promises to help homeowners avoid foreclosure, keep their homes and repair their credit, but ended up leaving victims homeless and with no equity.

The 11-count indictment alleges that Cousins, a senior loan officer with the Metropolitan Money Store in Lanham, Md., and several business associates paid straw buyers who then obtained fraudulently inflated loans, raised their credit scores and then qualified for more favorable mortgages. Straw buyers allegedly took equity out of the properties for their personal use and stopped making mortgage payments, resulting in properties being foreclosed upon.

Victims were persuaded to sell their homes but only on a temporary basis, and would be able to reacquire the title to their properties after repairing their own credit and obtaining more favorable mortgages, the Justice Department said.

The indictment seeks forfeiture of $1.5 million that prosecutors allege Cousins collected through the scheme.

Cousins faces a maximum sentence of 30 years in prison and a $1 million fine for the conspiracy and each of the mail fraud counts, and 10 years in prison and a $250,000 fine on each of the money-laundering counts.

Eleven co-conspirators have already pleaded guilty and have been sentenced in the case.

SAN FRANCISCO—John A. Bui was sentenced today to 41 months in federal prison and ordered to pay $3,500,000 in forfeiture as a result of his convictions for conspiring to commit wire fraud, destruction of records in a federal investigation, and witness tampering, United States Attorney Joseph P. Russoniello announced.

Mr. Bui pleaded guilty to these charges on August 21, 2009. In pleading guilty, Bui admitted that, in a scheme that began no later than 2003 and continued until approximately April 30, 2009, he defrauded mortgage lenders and financial institutions by providing false and fraudulent information in support of mortgage loan applications.

Working out of an office in Milpitas, Calif., Bui and his employees assisted individuals who wanted to obtain mortgages from mortgage lenders so they could purchase residential properties in the Northern District of California and elsewhere. As a part of this scheme, Bui routinely transmitted fraudulent loan applications to mortgage lenders that contained false employment information and false and inflated income and bank account information.

The information was intended to inflate the borrowers’ creditworthiness. In addition, the loan applications were supported by false and forged documents that purported to verify the borrowers’ employment, income, and assets. Bui and other members of the scheme used a network of co-conspirators who agreed to pose as the borrowers’ employers and to falsely verify to the mortgage lenders the accuracy of the employment and income information listed on the loan applications.

As a result of Bui’s participation in this conspiracy, he illegally earned at least $3.5 million. To date, Bui has paid $460,000 in forfeiture toward the $3.5 million he has been ordered to repay.

Bui, 46, of San Jose, Calif., also admitted at the time of his guilty plea that on or about May 2, 2009, after learning that agents of the Federal Bureau of Investigation had executed a search warrant on the San Francisco office of a co-conspirator, he destroyed and caused to be destroyed substantially all of the loan files in his possession with the intent of preventing the FBI from obtaining evidence of his mortgage fraud activities.

Bui also admitted that on or about May 28, 2009, he caused a letter to be delivered to an individual located within the Northern District of California who he believed was cooperating with the FBI’s investigation. Bui’s letter asked the individual not to provide information to the FBI agents assigned to the investigation.

The sentence was handed down by U.S. District Court Judge Susan Ilston. Judge Illston also sentenced the defendant to a three year period of supervised release to follow his prison term. Bui has been in custody since May 2009.

Jeffrey Rabkin and Jeffrey Finigan are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Elizabeth Garcia and Rayneisha Booth. The prosecution is the result of an investigation by the Federal Bureau of Investigation.

Frederick Earle Deen, 30, was sentenced to 24 months in prison today for his role in a $20 million mortgage fraud scheme that operated in the Twin Cities.

U.S. District Court Judge Richard Kyle handed down the sentence, which was reduced because Deen cooperated with investigators and is expected to testify at future proceedings.

Sentencing guidelines called for Deen to spend 46 to 57 months in prison, Kyle said. Deen’s attorney, Joe Friedberg, told Kyle that “there’s no way he would dare not cooperate in the future.”

Deen was a part owner of Legacy Lending, which obtained mortgage loans from unsuspecting lenders using straw buyers. From 2005 to 2007, Deen and business associates used inflated appraisals and received $2.2 million payments out of loan proceeds. Some of the largest fraudulent deals involved properties in Rogers and Otsego, Minn.

Deen had earlier pleaded guilty to wire fraud involving a transfer of more than $575,000 and evading taxes on $200,000 in income. At Friday’s sentencing, he apologized to his friends and family for his actions.

At one point Deen’s sentencing turned into a debate over the role of Taylor Trump in the fraud scheme. Trump, who has a criminal record and served as a police informant, was sentenced to 20 years in prison back in 2008. The U.S. Bureau of Prisons has said Trump is in custody, but would not disclose the location.

Friedberg said that Deen and the others involved in the scheme “we’re scared to death” of Trump. “They were worried they’d end up with their bodies in a field,” Friedberg said.

But Tim Rank, an assistant U.S. attorney prosecuting Deen, said that Trump worked with Deen for two years, and that Deen also carried out the scheme on his own with other colleagues after Trump was no longer involved.

Earlier this week Thomas John Hunter, another part owner of Legacy Lending, pleaded guilty to wire fraud and money laundering.

Deen was released after Friday’s hearing and will surrender to federal authorities in six weeks to begin his sentence. Friedberg said he’ll ask federal authorities that Deen serve his time at a federal prison in Duluth, Minn.

Yesterday in federal court in St. Paul, the 30-year-old part owner of Legacy Lending pleaded guilty to participating in a mortgage fraud scheme that involved 37 separate real estate transactions and $20 million in loan proceeds. Appearing before United States District Court Judge Richard H. Kyle, Thomas John Hunter, of Maple Grove, pled guilty to one count of wire fraud and one count of money laundering in connection to this crime. He was charged via an information on January 26, 2010.

In his plea agreement, Hunter admitted that from September 2005 through July 2007, he and others carried out a fraud scheme, through which mortgage loans were obtained from unsuspecting lenders by straw purchasers, in amounts far exceeding actual purchase prices, based on inflated property appraisals. Hunter also admitted that during the course of this scheme, he and others failed to inform lenders that funds in excess of the actual property purchase prices were misappropriated by those involved in the fraud scheme, and that concealed payments were made out of loan proceeds to participants in the scheme.

To further the scheme, Hunter and others caused fraudulent loan applications to be provided to potential lenders in which property purchasers were falsely identified and property was falsely described as “owner occupied” when in fact each straw buyer was purchasing multiple properties at the same time. In application materials submitted to lenders, the defendant and others also inflated the income and assets of potential borrowers, and a licensed real estate appraiser involved in the fraud scheme created inflated appraisals of the properties to support the fraudulent loan amounts. The defendant participated in 37 separate fraudulent real estate transactions, worth approximately $20 million in total loan proceeds, from which at least $2.2 million was received by participants in the scheme through illegal, concealed payments.

Specific to the charges filed against him in this case, Hunter admitted that on April 20, 2006, he and others engaged in an illegal wire transaction when they obtained $825,000 in mortgage loan financing for the purchase of a residence in Rogers, Minnesota. Hunter also admitted that from those funds, he and his co-conspirators misappropriated at least $110,000. In addition, Hunter admitted that on April 21, 2006, he engaged in an illegal monetary transaction when a check in the amount of $13,2000, representing proceeds from the fraud, was deposited into a Legacy Lending bank account.

For his crimes, Hunter faces a potential maximum penalty of 20 years in prison on the wire fraud count and 10 years on the money laundering count. Judge Kyle will determine his sentence at a future date. This case is the result of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation Division. It was prosecuted by Assistant U.S. Attorneys Timothy C. Rank and Christian S. Wilton.

One of Hunter’s co-conspirators, Frederick Earle Deen, age 30, of Minneapolis, who also had part ownership interest in Legacy Lending, is scheduled to be sentenced this Friday for his role in the fraud scheme. Another co-defendant, Taylor Trump, was sentenced for his involvement in this crime on August 21, 2008.

A Weld District Court judge has ruled in favor of eight Greeley-area Latino residents in their civil rights complaints against owners of a former Greeley real estate agency and its mortgage company for targeting Latino homebuyers with deceptive practices.

The families last year filed civil rights complaints against JS Real Estate and co-owners Mark Strodtman and Dean Juhl, their assistant, Flora Carmona, and mortgage brokers Charles Brandt and Jessica Feliciano-Brandt.

The Colorado Civil Rights Coalition filed two separate lawsuits on behalf of the families, who said the defendants targeted them and tricked them into buying homes they could not afford, or put them in loans with adjustable and ballooning interest rates.

In the case filed by Martin Zozaya and Angelica Quintana, Judge Dan Maus issued a default judgment against all the defendants — except Strodtman and Carmona — ordering they each pay a $10,000 penalty. Damages in the second case, filed on behalf of Gerardo and Delia Bravo, Jesus and Cira Devora and Ramon and Blanca Madrigal, will be argued at a court hearing in May.

Contacted Monday, Juhl said he knew of the penalty, but he declined to comment.

Strodtman was found guilty last fall of 11 counts of felony theft, 11 counts of felony forgery and one count of racketeering under the Colorado Organized Crime Control Act for a mortgage scheme in 2006-07 involving a west Greeley subdivision. He was sentenced to 31 years in prison. Charges against Carmona, Brandt and Feliciano all were dropped in exchange for their testimony against Strodtman.

Strodtman and Carmona’s civil rights cases are still pending, according to the state Department of Regulatory Agencies. Strodtman’s attorney asked that the judge defer the civil case against him while his criminal case was still pending, and Carmona answered the first case, avoiding a default judgment; she did not answer the second case.

DORA director Steven Chavez found in November 2008 that the defendants violated Colorado’s Fair Housing laws by targeting Latino homebuyers in the Greeley area, with the intent to discriminate, which eventually forced the homebuyers into foreclosure.

DORA stated the defendants focused their advertising in traditional Spanish media markets and used affinity marketing techniques, such as using bilingual sales staff to lure buyers to specific properties that they were not financially qualified to buy, according to a prepared release.

Many homebuyers were promised that they would refinance in a few years and make a profit. When they tried to refinance, the complainants were told the homes weren’t worth what they paid for them and that they had no equity, the release stated.

The lawsuit states that Strodtman made discriminatory statements such as, “The whole Hispanic population can be likened to trained pigs coming to a trough; you give them reason to come and they’ll come and give you all their money.”

 
Mortgage fraud isn’t only a result of professional con men tricking innocent homeowners. Federal figures and criminal cases indicate that deceptive borrowers are responsible for a large part of current losses on mortgage loans.

According to a federal interagency called The Financial Crimes Enforcement Network, borrowers or customers constitute 57 percent of the subjects of Suspicious Activity Reports filed by banks and other reporting institutions. Brokers were next in line, representing 10 percent of the complaints, followed by appraisers, employees and agents.

“When borrowers are having difficulties in making payments, any fraudulent activity regarding the loan normally sticks out like a sore thumb, so many individuals and institutions are found to be participants in various types of mortgage fraud,” said Jason Boone, research assistant for the National White Collar Crime Center, in an interview.

Mortgage fraud is the fastest growing white collar crime in the U.S. The FBI estimates annual losses of $4 billion to $6 billion in mortgage-related fraud, and the numbers are expected to increase. According to the FBI, debt settlement companies, lawyers, brokers and real estate agents are among those involved in schemes of money laundering and creating fake legal documents. To obtain upfront fees, schemers create phony documents which they guarantee will satisfy struggling mortgage owners’ loan requirements.

“As properties affected by mortgage fraud are sold at artificially inflated prices, properties in surrounding neighborhoods also become artificially inflated,” stated an FBI report on mortgage fraud.

According to the FBI, the number of SARs filed for the third quarter of 2009 were 7 percent greater than in the year-earlier quarter, and a preliminary report for the full year 2009 showed an increase of 44 percent in SAR filings since the full year 2007, before the economic meltdown. In the 2009 third quarter Illinois ranked fourth in mortgage-fraud-related Suspicious Activity Reports in the U.S, with 1,441 SARs. California was first.

In 2008 federal prosecutors in Chicago charged 67 defendants with carrying out fraudulent mortgage schemes, and last June they brought similar cases against another 41 persons.

In some cases the defendants were charged with fraudulently inflating the values of dilapidated homes in urban areas. Other defendants were accused of fraudulently obtaining loans totaling than $17.2 million on expensive condominiums and penthouses in a River North building known as the Millenium Centre.

One defendent, Lawrence A. Luckett, CEO of the former Home Mortgage Inc., in Burr Ridge. Ill., allegedly submitted loan requests to GMAC Bank between August 2007 and March 2008 for more than 450 fictitious residential mortgage loans, causing the bank a loss of more than $15 million.

John Terzakis, a 52 year-old resident of Hindsdale, Ill., owner of Vesta Strategies, was arrested in January and charged with money laundering, wire fraud and stealing from clients to whom he promised real estate. He is currently in home confinement with electronic monitoring awaiting trial.

“Mortgage fraud is a serious issue that affects not just financial institutions but ordinary citizens who may have invested in such financial institutions,” stated Patrick J. Fitzgerald, U.S. attorney for the Northern District of Illinois, in the FBI report.

In other Midwest federal cases, Beverly A. Ross, of Noblesville, Ind., was sentenced to 63 months in federal prison following her guilty plea for fraudulently obtaining loans on 34 properties, causing several lenders a loss of $5.6 million.

Last month Debbie Sferrazza of Westchester, Ohio was indicted along with five members of her family for allegedly using her mortgage lending companies to submit loan applications using false employment documents and Social Security numbers, among other things. According to another federal indictment, handed up Feb. 10, Jeremy Beadle, a mortgage broker, bought five properties in St. Louis for $32,000, obtained false appraisals of them and sold them to people who qualified for mortgages based on false loan applications.

“Over the course of the next year or two, I expect mortgage fraud numbers to remain high, if not increase since the economy will most likely still be on shaky grounds,” said Boone of the National White Collar Crime Center.

According to the federal interagency report, lenders’ Suspicious Activity Reports  of SARs reported foreclosure and loan modification fraud as common, evidenced by occupancy misrepresentation, Social Security number discrepancies, and altered or forged documentation.

“SARs involving loan modifications described potential fraud in either the application for the loan modification, or in the older loan which came under review subsequent to the modification application,” the report stated.

Thirty-five percent of the SARs indicated an amount ranging from $100,000 to $250,000, while 5 percent were filed for suspected amounts of $1 million or more.

The other side of mortgage fraud is evidenced by complaints from homebuyers, which are also rising. Illinois Attorney General Lisa Madigan’s office reports that nearly 4,000 homeowners filed residential mortgage complaints last year, a 65 percent increase over 2008. 

“Hardworking people are struggling to make their mortgage payments on time. They’re fighting to cope with mounting debt, and they’re being targeted by con artists looking to make a quick buck,” Madigan stated in a press release.

In October 2008 she sued Countrywide, the nation’s largest mortgage lender, on charges of predatory lending and obtained an $8.7 billion settlement.

This month Madigan sued four “debt settlement companies” alleging that they engaged in deceptive marketing practices, charging excessive fees and not changing their customer’s debt situation.

“These companies are unfairly luring financially strapped consumers with misleading claims that they can effectively eliminate consumer’s debt,” Madigan stated in a release.

Last year Madigan filed 31 lawsuits targeting mortgage rescue scams.

BALTIMORE, MD—David Wehrs, Sr., age 54, of Annapolis, Maryland, pleaded guilty today to wire fraud in connection with a scheme to defraud investors and financial institutions of more than $2.3 million.

The charge was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation.

According to his plea agreement, Wehrs owned Maryland Title and Escrow Company, Inc., located in Annapolis, and operated a small home remodeling company called Show-Me. From 2007 to October 2009, Wehrs induced individuals to invest money through Maryland Title into a purported FDIC-insured money market fund that Wehrs “guaranteed” would pay monthly interest payments of 10.85%.

Instead of depositing the money into an “American Funds Fixed Rate Money Market” as promised, Wehrs deposited investor funds into one of two bank accounts he controlled in the name of his title company. Wehrs wire transferred a large portion of these investor funds to a brokerage account in the name of his title company, then used the money to “day trade.” Day trading is the rapid buying and selling of securities throughout the day in the hope that the stocks will continue climbing or falling in value for the seconds to minutes that they are owned, allowing a person to lock in quick profits.

During the scheme, Wehrs conducted millions of dollars of stock trades per month. From early 2008 until mid-2009, Wehrs lost approximately $1 million.

In addition to day trading, Wehrs used some of the investor funds to: pay “monthly interest” and “redemptions” to other investors; pay expenses of his other businesses, including Show-Me; make escrow payments for his title company; buy real estate and personal property; and pay other personal expenses.

Wehrs admitted that in June 2009, when he had no money left in his personal bank accounts or day trading accounts to pay interest due to investors, he used $630,611 earmarked to pay lending institutions for mortgage payoffs from his escrow account at Maryland Title to pay investors, causing that amount of loss to the title insurance company for Maryland Title. He also used $100,000 from the Maryland Title escrow account that was earmarked as earnest money for the purchase of an individual’s home to pay interest to investors, causing a loss of $100,000 to the home buyer.

The total loss as a result of Wehrs’ scheme is $2,371,061 to investors and the title insurance company. U.S. District Judge Benson Everett Legg has scheduled sentencing for May 19, 2010 at 3:00 p.m.

Wehrs faces a maximum sentence of 20 years in prison. As part of his plea agreement, Wehrs is required to pay restitution of $2,371,061 and to forfeit any assets derived from the scheme. Any forfeited assets will be applied to the restitution amount.

Mr. Rosenstein and Mr. McFeely gave special thanks to the Securities and Exchange Commission and the Maryland Insurance Administration for their work in the investigation and prosecution of this case.

United States Attorney Rod J. Rosenstein commended Assistant United States Attorney Tonya Kelly Kowitz, who is prosecuting the case.

A 56-year-old Rainbow City woman pleaded guilty Wednesday in federal court to charges of bank and mortgage fraud that totaled more than $500,000, U.S. Attorney Joyce White Vance and FBI Special Agent in Charge Patrick Maley announced.

ROXANNE SAUNDERS GILLILAND entered guilty pleas before U.S. District Judge C. Lynwood Smith, Jr., to one count of making false statements on a mortgage loan application and three counts of bank fraud. She agreed to forfeit $577,796 to the government as proceeds of illegal activity.

According to GILLILAND’s plea agreement and other court documents, GILLILAND was an employee of Dawson Construction Company in Gadsden and, between March 2005 and October 2008, fraudulently withdrew the $577,796 from personal and business accounts connected to the company. Also, in April 2007, GILLILAND submitted a personal home mortgage application in which she claimed a business account of Dawson Construction as a personal asset in order to obtain a mortgage loan she would have been otherwise ineligible to receive.

“Any individual who commits both bank and mortgage fraud becomes a serious threat to our community. This defendant’s criminal fraud struck at both our local businesses and financial community. It is our mission to deal with these individuals swiftly and decisively in order to deter others from committing similar crimes,” Vance said.

The maximum sentence for counts one through four is 30 years in prison and a $1 million fine.

Special agents of the FBI investigated the case, which Assistant U.S. Attorney Patrick Carney is prosecuting for the government.

A 41-year-old Quincy man was sentenced to 42 months in federal prison on a mortgage-fraud conviction.

In U.S. District Court on Tuesday, Judge Douglas P. Woodlock also gave Michael Hicks three years of supervised release following his imprisonment. An order of restitution was deferred for up to 90 days because one unit of the foreclosed properties is scheduled to be sold at auction.

Hicks pleaded guilty in November to one count of wire fraud and one count of money laundering.

The office of U.S. Attorney Carmen Ortiz said Hicks recruited straw buyers and provided false financial information to secure mortgages for five dwellings on Quincy Street and Sexton Court in Dorchester.

Hicks was paid a total of $180,500 by Michael Lee, who converted the Quincy Street dwelling into three condominiums. The Sexton Court dwelling is owned by Lee’s in-laws.

The payment to Hicks was turned over to the government and the court ordered its forfeiture.

Lee has also been indicted on five charges of wire fraud in connection with the scheme. His case is pending.

The case was investigated by the Secret Service and the criminal investigations branch of the Internal Revenue Service. It was prosecuted by Assistant U.S. Attorney Sandra Bower of Ortiz’s economic crimes unit.

The state Department of Public Health found last year that Hicks was the victim of botched liposuction surgery in 2008. The report placed the blame on both the doctor and Beth Israel Deaconess Medical Center, where it was performed. Hicks sued the hospital, six doctors and two nurses and reached a confidential settlement.

PREET BHARARA, the United States Attorney for the Southern District of New York, JOSEPH M. DEMAREST JR., the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (”FBI”), and BRIAN G. PARR, the Special Agent-in-Charge of the New York Field Office of the United States Secret Service (”USSS”), announced today the arrests of three defendants—SHAHEID BILAL, RHONDA PAYNE, and RICHARD BRITT—on charges stemming from a subprime mortgage fraud scheme involving $3 million worth of mortgages on residential properties in and around Orange and East Orange, New Jersey.

According to the five-count Indictment filed in Manhattan federal court:

From 2005 through 2007, the defendants targeted residential properties in Orange and East Orange, New Jersey. To purchase the properties, the defendants submitted mortgage loan applications, in the name of straw purchasers, that contained false information regarding, for example, the applicant’s creditworthiness and intention to live in the residence. The defendants recruited such straw purchasers by, among other things, paying them thousands of dollars in fees. The defendants told several of these straw purchasers that they would not have to pay the mortgages because the defendants would make payments for several months, and/or that the defendants would make money to pay the mortgages by renting out the properties. The defendants involved in each transaction distributed the proceeds from the fraudulently obtained home mortgage loans among themselves and their co-conspirators for their personal gain.

The defendants involved in each transaction further profited by renting out the fraudulently mortgaged properties to tenants while failing to make mortgage payments on behalf of the straw purchasers. Certain affected straw purchasers have gone into default on their mortgages, and mortgage lenders have foreclosed on certain properties.

BILAL, 33, of Lawrenceville, Georgia, supervised and coordinated the recruitment of straw purchasers and the preparation of fraudulent loan applications and other documents for submission to the lenders, among other things.

PAYNE, 36, of Queens, New York, recruited straw purchasers to participate in the fraudulent scheme and assisted in the preparation of fraudulent paperwork for submission to the lenders, among other things.

BRITT, 48, of McDonough, Georgia, assisted in the preparation of fraudulent paperwork for submission to the lenders, among other things.

A chart setting forth the charges contained in the Indictment and the maximum potential penalties for each offense is below.

All three defendants were arrested yesterday. This case has been assigned to United States District Judge DENNY CHIN. PAYNE was presented yesterday before United States Magistrate Judge THEODORE H. KATZ in Manhattan federal court;

BILAL and BRITT were presented yesterday before United States Magistrate E. CLAYTON SCOFIELD III in the Northern District of Georgia.

Mr. BHARARA praised the work of the FBI, USSS, FDICOIG, and USPIS. He also thanked the New York State Banking Department for their outstanding work in the investigation.

U.S. Attorney PREET BHARARA stated: “In a time when real families are having difficulties obtaining mortgages honestly, it is all the more important to stop schemes to obtain mortgages fraudulently. The money stolen from banks in mortgage fraud schemes is money that could be going to enable working families to buy homes. We will continue to work with our partners at the FBI, the USSS, and the FDIC-OIG, as well as the New York State Banking Department, to bring mortgage fraudsters to justice.”

FBI Assistant Director JOSEPH M. DEMAREST, JR., stated: “Vigorous enforcement to thwart mortgage fraud is an FBI priority. The health of the economy is affected by the vitality of the housing market, and steps to ensure integrity in mortgage financing reduce the risks of failed banks and foreclosed properties.”

USSS Special Agent-in-Charge BRIAN G. PARR stated: “Mortgage Fraud continues to be a priority investigative area for the United States Secret Service. Our partnership with the other agencies allows us to maximize our resources to combat this type of fraud.”

Two men, accused of selling the same property twice, were convicted on several counts, including grand larceny.

Mavis Samuel, 41, and Carlyle Ebanks, 55, were charged with selling the same Crown Heights building twice, to two different straw buyers.  They were convicted of Grand Larceny in the Second Degree and multiple counts of Falsifying Business Records in the First Degree. When they are sentenced April 13, they will face up to 15 years in prison.

The defendants first sold 1162 Pacific Street in September 2004. In that transaction, they paid a straw buyer $4,000 to buy the building. Though the straw buyer held the deed, Ebanks and Samuel maintained control of the building. While the straw buyer was recovering from a traumatic brain injury in spring 2005, Samuel convinced him to deed the property back to her.

Then, in November 2006, Ebanks approached a friend and told him that if he bought the building, Samuel and Ebanks would make him a partner in their real estate investment company. The defendants illegally inflated the “partner’s” income and savings account balance on a $1 million mortgage application, to buy 1162 Pacific Street for that price. With that “sale”, they paid off the mortgage on the original straw purchase, pocketed between $300,000 and $400,000, and maintained ownership.

In the time between the two sales, the building burned down. The case originated with the investigation into a string of suspected arsons in Crown Heights in early 2006.

In the fourth quarter of 2009, California had the highest mortgage fraud risk, according the quarterly Mortgage Fraud Risk Report released Friday by Agoura Hills, California-based Interthinx, a provider of risk mitigation and regulatory compliance tools for the financial services industry.With an index value of 222, California took the No.1 spot from Nevada, which had topped the rankings over the last five consecutive quarters.

Nevada dropped to second place with an index of 220 and was closely followed by Arizona with an index of 211. Florida remained in fourth place with an index of 179, and Colorado was ranked fifth with an index of 153. With indices between 55 and 71, West Virginia, Maine, Kansas, South Dakota, and Montana were named as the five states with the lowest mortgage fraud risk.

According to Interthinx, its fraud risk indices have proven to be a leading indicator of foreclosure activity. As a result, the company said regions that currently have high fraud risk indices are likely to have high foreclosure rates going forward, particularly if housing prices continue on their downward trajectory and if there is no significant improvement in general economic conditions.

The Mortgage Fraud Risk Report also included an analysis of national mortgage fraud and indices for the four most common types of mortgage fraud, including property valuation fraud, occupancy fraud, employment/income fraud, and identify fraud. The findings showed that most fraud types are on the rise.

Despite a 4 percent quarter-to-quarter decrease, the property valuation fraud risk index was up 40 percent over the fourth quarter in 2008 and jumped more than

100 percent from the same period in 2007. Interthinx said this index will continue to be driven by schemes involving short sales, REO inventories, wholesale flipping, and refinancing by borrowers whose equity has been impaired by falling real estate values.

The occupancy fraud risk in the fourth quarter of 2009 rose 16 percent from the third quarter, marking the first significant increase in the index since the fourth quarter of 2006. The magnitude of the quarter-to-quarter increase suggests that occupancy fraud risk will be a serious issue going forward, Interthinx said. The company explained that this will be especially true as continuing price declines and “get-rich-quick” schemes lure investors back into the market and as builders face continuing difficulty in moving unsold inventory.

While employment/income fraud was down 29 percent over the previous year, it increased 3.4 percent from the third quarter — the first increase since the index peaked in the third quarter of 2007. Interthinx said it is too soon to tell whether this uptick signifies a rebound in employment/income fraud risk or whether it reflects a temporary “blip” associated with schemes involving the federal homebuyer tax credit.

Identity fraud, which is frequently used in mortgage fraud schemes in order to hide the identity of the perpetrators and/or to obtain a credit profile that will meet lender guidelines, was the only type of mortgage fraud that showed no increase in the quarterly report. According to Interthinx, the identity fraud risk index has remained relatively constant over the last two years, declining 2 percent from the previous quarter and 4 percent from a year ago.

Going Forward, Interthinx projects that if interest rates remain low, the predominant fraud type will continue to be related to property valuation, as speculative investors and “flipping” return to the market and as consumers attempt to refinance their mortgages despite reduced equity in their properties. Interthinx also expects a rebound in occupancy fraud, particularly in light of investor demand, fueled by ample inventories and the expected release of shadow inventory. In addition, the company said it is likely that the fraud risk index will continue to rise through 2011, as a wave of adjustable-rate mortgages recast for the first time.

A title company owner, who operated Homemaxx Title & Escrow, was arrested in Palm Beach, Florida. He had been a fugitive since March 26, 2009, when a federal grand jury in Maryland, returned an indictment charging him with wire fraud and money laundering in connection with a scheme to defraud lenders and homeowners.

The indictment states that from February 2003 to July 2004, the fugitive owner had caused Homemaxx to divert funds meant to pay outstanding first mortgages on real estate transactions or to officially record deeds. He had transferred substantial amounts of money from a Homemaxx escrow account into other Homemaxx accounts, as well as to accounts not associated with any transactions.

He then used the money intended to be disbursed per the HUD-1 settlement for personal use that had nothing to do with the real estate transaction. With one particular real estate refinancing by one of his customers, he diverted funds from the escrow account and then used the proceeds to purchase a new 2004 CLK Mercedes.

The indictment seeks the forfeiture of $593,228, and is alleged to have defrauded lenders and homeowners and to have used $93,228 of the criminal proceeds for money laundering. Although, an indictment is not a finding of guilt, an individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.

One of the most difficult aspects of dealing with real estate fraud is that it is hard to know the scope of the problem. The human element that is involved makes would-be fraudsters hard to spot, and those already committing fraud even harder to identify.

Because these people are white-collar criminals, they look, dress, act, and talk just like the rest of us. They won’t look like criminals; they’ll look like loan officers, title closing agents, real estate agents, members of management and loan processors or closers and, of course, the people next door.
Once a white-collar criminal gets away with it, the process quickly becomes addictive. Success breeds more success, and before long such crafters of fraudulent mortgage transactions clearly begin feeling that not only are they above the law but in fact, they are not doing anything wrong in the first place.

We should all congratulate the United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation.

We must be vigilant against fraud, recognizing its signs and taking proactive, definite, and realistic steps to not only prevent it but also punish it.
It starts with me.
It starts with you.
It starts with us…

Michael S. Richardson
Author of “An American Epidemic, Mortgage Fraud a Serious Business”
www.mortgagefraudsolutions.com

A Brookline man has been sentenced to five years probation, with four months of home detention, for participating in a mortgage fraud scheme, federal prosecutors said.

Jason Jester, 40, of Fordham Drive was convicted of wire fraud conspiracy for running Precision Mortgage, a mortgage broker business that helped borrowers obtain real estate loans by lying about the borrowers’ finances, prosecutors said.

Jester conspired to submit false documents to lenders, including appraisals that overstated the value of property, and federal tax forms and pay stubs that overstated the borrower’s income, prosecutors said.<-->

Nora R. Dannehy, United States Attorney for the District of Connecticut, announced that ANNA McELANEY, 38, a licensed real estate agent residing in Norwalk, pleaded guilty today before United States Magistrate Judge Holly B. Fitzsimmons in Bridgeport to one count of bank fraud stemming from her involvement in a “short sale” mortgage fraud scheme.

A short sale transaction involves a mortgage holder or lender entering into an agreement to release its mortgage or lien on real property in exchange for payment of less than the total amount owed on the underlying debt. Many short sale transactions are legitimate.

According to court documents and statements made in court, McELANEY worked with Sergio Natera, also a real estate agent, to defraud Regions Bank, which held two mortgages on a residential property in Bridgeport. On December 5, 2007, McELANEY, who was a listing agent for the property, received an offer to purchase the property for a price of $132,500. However, McELANEY and Natera subsequently directed communications to Regions Bank that the highest offer to purchase the property was for $102,375 by BOS Asset Management, LLC, an entity that Natera controlled. The bank agreed to a short sale of the property for the lower price, and released its mortgages on the property.

On June 9, 2008, Natera, through BOS Asset Management, sold the property for $132,500 to the original bidder on the property, and Natera and McELANEY retained the difference in the two sale prices.

McELANEY is scheduled to be sentenced by United States District Judge Janet C. Hall on May 10, 2010, at which time she faces a maximum term of imprisonment of 30 years, a fine of up to $1 million, and an order of restitution.

Natera pleaded guilty to one count of bank fraud on February 11, 2010. He awaits sentencing.

This matter is being investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorney Ann M. Nevins.

In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. In addition to investigating past mortgage fraud schemes, the Task Force will focus on emerging crime trends that are associated with the growing tide of foreclosures, including foreclosure rescue schemes, and short sale schemes. Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 and requesting the Connecticut Mortgage Fraud Task Force, or by sending an email to ctmortgagefraud@ic.fbi.gov.

The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation Division; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General, and State of Connecticut Department of Banking.

These are mortgage scammers. And now, some national organizations, including the Federal Bureau of Investigation, are targeting them.

On Thursday in New York, one of the organizations that tries to steer homeowners to legitimate counselors teamed up with Mayor Michael Bloomberg to roll out a “Loan Modification Scam Alert.” The goal: to prevent yet more people from giving money to financial predators. The nonprofit organization, NeighborWorks, has already tried to warn distressed homeowners in California, Florida, Texas, Ohio, and Maryland. California leads the nation in complaints about mortgage fraud.

“It is a rising problem, with more and more people every day calling to say they have been scammed,” says Eileen Fitzgerald, chief operating officer of NeighborWorks. “Folks are desperate, and they are willing to try anything.”

Although there are no national numbers on how many people are being scammed – many people are too embarrassed to report they got taken – there are probably hundreds of thousands of victims, Ms. Fitzgerald says.

The problem will get worse this year, she anticipates, because so many adjustable-rate mortgages (ARMs) are coming up for renewal – especially in California, Florida, Arizona, and Nevada. Particularly problematic could be option ARMs, in which the homeowner decides how much money he or she can afford to pay each month.

“Your ability to pick the amount you can afford to pay is definitely becoming much harder, and the monthly payments on the vast majority of these mortgages are going up,” Fitzgerald says.

At the same time, the number of loan modifications made by the companies servicing mortgage payments remains relatively small but growing.

As of the end of January, 116,000 permanent loan modifications had made since last February, when the Obama administration unveiled its Making Home Affordable Program, according to the US Treasury on Wednesday. The Obama program provides incentives to lenders to modify mortgages.

The 116,000 figure is double the number in December. In addition, 76,000 homeowners have been offered permanent loan modifications but have not signed the paperwork yet.

However, many more mortgage problems persist. As of September 2009, the Mortgage Bankers Association reported, 5.8 million mortgages were at least 60 days delinquent. This includes homes that have entered the foreclosure process.

TransUnion, a credit reporting company, released its own numbers on Tuesday. At the end of the fourth quarter last year, it said, 6.89 percent of all US mortgage payments were at least 60 days past due. That was an all-time high.

Enter unscrupulous loan-modification companies. They advertise on late night-television or radio shows and sound as if they are linked to the Obama program.

“Many of them have the word ‘hope’ in their phone number,” says Jonathan Mintz, commissioner of the Consumer Affairs Department in New York. “But it’s a false hope.”

New York City recently passed a mortgage antifraud law that requires loan-modification companies to reveal that they cannot charge upfront fees. People in need are encouraged to call a 311 phone number to get referred to legitimate counselors. But many of the scammers are located in other parts of the United States.

For example, a man in Queens, a borough of New York City, recently contacted a California company that was advertising heavily on radio and television that it could modify mortgages.

“They asked for $4,800 upfront, and the desperate homeowner sent them $2,200 dollars,” says Petra Tuomi, policy director at the Center for New York City Neighborhoods, a network of nonprofits that provides services for housing counseling. “They told him to stop paying the mortgage to the lender, and then he was stuck with them.”

The company has since gone out of business, and the man lost his $2,200.

Suspicious activity reports filed in the third quarter of 2009 showed a 7.5 percent increase in possible mortgage loan fraud over a year earlier, the Financial Crimes Enforcement Network (FinCEN) reported on Thursday.

Forty-two percent of the reported activity took place in California and Florida, while the greater Miami, Los Angeles and New York areas topped the list of metropolitan locations.

The Bank Secrecy Act requires financial institutions to file suspicious activity reports, or SARs, with FinCEN when they identify or suspect fraudulent activity.

A unit of the U.S. Treasury Department that provides and analyzes financial intelligence, administers the Bank Secrecy.

The report covered the period from July 1 to Sept. 30, 2009. FinCEN said that 15,697 mortgage loan fraud SARs had been submitted during the quarter, up 7.5 percent over the third quarter of 2008.

But the agency cautioned that the increase did not necessarily reflect an uptick in fraud. It said three-quarters of the suspicious activity reports, which were filed by depository institutions, included activities that were more than a year old, and half included activities that were more than two years old.

But FinCEN said it had received hundreds of reports describing possible loan modification fraud or foreclosure rescue scams since it asked financial institutions in April to look for “red flags” indicating such activities.

The agency said two schemes were most commonly reported in the SARs:

One involved homeowners who were duped into signing quit-claim deeds to their properties. The homes were then sold to straw borrowers and the homeowners received eviction notices.

The other involved scammers who falsely claimed affiliations with lenders to convince distressed homeowners to pay large advance fees for modification services. The scammers then took no action on the homeowners’ behalf.

U.S. Attorney General Eric Holder said last month the FBI was investigating more than 2,800 mortgage fraud cases — up nearly 400 percent from five years ago.

In November, President Barack Obama set up an interagency task force to focus on fraud in mortgages, securities, economic stimulus programs and government bailouts.

A 32-year-old Birmingham man pleaded guilty today in federal court to mail fraud charges connected to a mortgage fraud scheme that totaled more than $1 million, announced U.S. Attorney Joyce White Vance in conjunction with FBI and Housing and Urban Development officials.

Al Carson Rockett, Jr.,  was charged in a five-count information filed in U.S. District Court in Birmingham and pleaded guilty today before U.S. District Judge R. David Proctor to all charges. He agreed to forfeit $1,090,046 to the government as proceeds of illegal activity.

The four mail fraud counts involve parcels containing mortgage-application documents sent by a private postal carrier from Birmingham to mortgage companies in June, July and August 2005. The mortgage fraud ring operated between 2004 and 2006, according to court documents. Count Five of the information sought the forfeiture from Rockett.

According to Rockett’s plea agreement, he conducted the mortgage fraud as follows:

Rockett convinced people they could buy houses from him without any down payment or closing costs and without the need for documents to support a loan application. Buyers were told the houses were ready to be used as government-subsidized rental properties, that tenants were available to move in immediately and rent payments would exceed the mortgage payments. In many instances, however, there were no tenants, the buyers couldn’t make the mortgage payments, and the properties quickly fell into foreclosure.

On other loans, Rockett stated on loan documents that buyers were making down payments when, in fact, Rockett was making the payment.

Finally, none of the loan documents disclosed Rockett was paying each buyer between $3,000 and $10,000 as an inducement to buy his properties. The mortgage loan documents involved required that all cash payments between a buyer and seller associated with a real estate transaction be disclosed.

“This case is a clear example of the dangerous fraud that has permeated our real estate markets,” Vance said. “This prosecution should send a clear signal to anyone who has, or might consider falsifying any type of loan documents that it is our goal to investigate every case and bring the perpetrators to justice. This is not just a question of addressing losses to our financial community,” she said. “We have seen the value of our homes plummet and our communities put at risk by individuals who steal, lie and abuse the system. When a person lies on loan documents and then goes into foreclosure, we all suffer.”

HUD Inspector General Kenneth Donohue said Rockett’s case is an example of how his office, working with law enforcement agencies and U.S. Attorneys’ Offices across the country, will pursue individuals who are participating in mortgage fraud schemes, which are eating away at the economic heart of this country. “We will use whatever means necessary - both civil and criminal - to isolate and punish mortgage companies’ leadership and personnel who are corroding the soundness of HUD programs,” Donohue said.

“Mortgage fraud tears at our economy and threatens the American dream,” said FBI Special Agent in Charge Patrick Maley. “As the mortgage fraud problem continues to grow, the people of North Alabama can be assured that the FBI, along with our law enforcement partners, will be there to aggressively investigate and bring to justice those who would work to defraud financial institutions through lies and deceit,” he said.

The maximum sentence for each mail fraud count is 20 years in prison and a $1 million fine.

Stephen Thomas Bybel had a business idea that would make him a landlord and line his pockets while sprucing up neighborhoods where homes in foreclosure were left to deteriorate and become targets of vandals.

Pasco County sheriff’s officials see it another way: He broke into vacant homes, changed the locks and rented out other people’s houses. Bybel was arrested at his house Wednesday and was charged with one count of scheming to defraud.

Reached by telephone after his release from jail, the 48-year-old Bybel maintained he didn’t defraud anyone.

“I think I’m doing a service to the community.”

In all, Sheriff Bob White said, Bybel took possession of 72 homes – in the Land O’ Lakes and Wesley Chapel areas — beginning in December and rented out 31 of them. White said Bybel collected nearly $17,000 for rent in January on the homes; Bybel said that’s not correct because some people didn’t pay their rent. He didn’t say how much he collected.

Ken Londo said he gave Bybel $650 for a three-bedroom house in Land O’ Lakes two weeks ago.

“I had no idea, actually,” he said when told of the allegations against Bybel.

“I’m freaking out. What are you going to do?” said his wife, Lisa Londo. “I don’t know.”

The Londos said they moved to the home on Aldus Drive with their four children because their previous apartment was filled with black mold.

“We really thought that we had found the right place,” Lisa Londo said.

The investigation into Bybel began when a real estate agent, also a part-time Pasco deputy, was recently trying to show a house that was for sale but discovered the locks had been changed. He saw a notice from Bybel’s company on the door and called him. Bybel told him he had “gotten the wrong house” and then provided a key to the Realtor, a sheriff’s office report states.

In September, Bybel started a company – Real T Solutions Investments, LLC — and hit the streets of central Pasco searching for vacant homes. He would select some and then by filing a one-paragraph “memorandum of adverse possession” legal notice with the Pasco Clerk of Courts office, he would take possession of such properties. Bybel would then change the homes’ locks, sometimes give them a fresh coat of interior paint and then rent them out.

Bybel, who lives at 22430 Stillwood Drive, said Wednesday that he went through hoops trying to locate owners of the homes. He sent them letters via the mail, tried to find them on Facebook and left notices on their properties’ front doors. Detectives say they don’t believe any of the homeowners were properly contacted.

One of the homes which Bybel has taken over, White said, is owned by another deputy who just started work this week.

Apparently, it’s a scheme that’s being done in Miami and Las Vegas, the sheriff said. In fact, White said, they are investigating another unrelated similar scheme in Pasco.

This comes at a time when tens of thousands of Florida homes are sitting empty, their owners too financially strapped to stay. Keeping track of so many homes is taxing on lenders, and many of the homes have been abandoned by owners waiting for foreclosure to be finalized.

It’s easy to see how foreclosed homes could slip through the cracks, said Anthony DiMarco, spokesman for the Florida Bankers Association. He said he hasn’t heard of such a scheme but isn’t surprised.

“There has been so much mortgage fraud, and there are lots of foreclosed homes,” he said. “It’s a matter of numbers.”

Bybel has maintained to authorities he was within his legal rights of adverse possession, said Detective Jeff Peake of the economic crimes unit.

The adverse possession statute’s intent, said White, is indeed to claim property but not in the way in which Bybel interpreted it. For example, he said, if someone mistakenly builds a structure that stretches over the property line of his neighbor’s and it goes uncontested for a certain amount of time, the land can be claimed as the person who built the building.

“That’s nowhere near this,” White said of what Bybel was doing. “This is closer to burglary and grand theft than adverse possession.”

Bybel said when he was setting up his business he ran the idea by a few lawyers.

“They all said this was a gray area,” he said. “They didn’t say not to do it.”

The way Bybel sees it, he cleaning up his community while helping others, kind of a modern day Robin Hood in times of an economy mired in recession. In fact, his company mission statement says as much.

“Help stabilize communities blighted by vacant homes. Clean up the properties and provide affordable housing to citizens in transition,” it states in part.

“I read the papers,” Bybel said. “I watch the news and the world is falling apart and nobody is doing nothing about it.”

Illegal or not, he said, he’s helping “save” Pasco.

“It’s a victimless crime,” he said.

Bybel said he wanted to make renting homes in this economy easier for people who have lost their homes, such as himself. His New Jersey home, he said, was foreclosed on about a year ago.

He advertised on Craigslist, didn’t collect deposits and didn’t charge outrageous monthly rents, Bybel said. All the while, he was making sure the homes were maintained and even did some repairs inside like patching walls, steam cleaning carpets and painting to make the homes nice for his renters – and the neighborhood.

Now those renters he says he helped – such as Londo — have to find new homes.

“They need to find a place to live and like they say, quick like a bunny,” White said.