ALEXANDRIA, VA—Aaron V. Hernandez, 41, of McLean, Va., was sentenced today to 63 months in prison, followed by four years of supervised release, for running a mortgage fraud scheme that caused more than $4.5 million in losses. Hernandez was ordered to pay more than $4.5 million in restitution and was ordered to forfeit approximately $2.4 million.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia; Shawn Henry, Assistant Director in Charge of the FBI Washington Field Office; and Daniel S. Cortez, Inspector in Charge of the Washington Division of the United States Postal Inspection Service, made the announcement after sentencing by United States District Judge Claude M. Hilton.

On May 21, 2010, Hernandez pled guilty to conspiracy to commit mail fraud and bank fraud. According to court documents, Hernandez was employed by a company in Woodbridge, Va., during 2006 and learned from its employees how to falsify the loan applications of prospective purchasers of vacant, sub-divided lots in North Carolina and South Carolina. The fraud included providing fake employment information and inflating buyers’ income levels, value of the real estate that they owned, or other liquid assets purportedly held by the applicants.

In December 2006, Hernandez struck out on his own and formed mortgage companies in Northern Virginia, using the same fraudulent practices he learned from his previous employer. His businesses grew to more than 10 employees, at least three of whom he conspired with to provide false and fraudulent loan applications to lenders.

Court documents list at least 14 properties that Hernandez financed through these fraudulent practices, all of which eventually resulted in foreclosure. The financial loss suffered totaled more than $4.5 million.

This case was investigated by the FBI Washington Field Office and the United States Postal Inspection Service. Assistant United States Attorneys Mark D. Lytle and Inayat Delawala prosecuted the case on behalf of the United States.

A copy of this press release may be found on the website of the United States Attorney’s Office for the Eastern District of Virginia at http://www.usdoj.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on http://pacer.uspci.uscourts.gov.

A Bethel Park man will spend 41 months in prison for his participation in a mortgage fraud scheme.

Michael Dokmanovich, 37, pleaded guilty to one count of conspiracy to commit wire fraud in May.

According to the prosecution, Mr. Dokmanovich operated Brandy Financial Services Co. He was accused of submitting false loan documents, including overstating borrowers’ assets and income.

The conspiracy also involved getting falsified appraisals that overstated fair market values for properties and falsified closing documents.

Mr. Dokmanovich was one of three people charged in the conspiracy.

Real estate attorney John L. Chaffo, of Murrysville, was found guilty by a jury in July of multiple counts of wire fraud and conspiracy to commit wire fraud.

He is scheduled to be sentenced by U.S. District Judge Donetta W. Ambrose on Nov. 1.

Another man, Bernardo Katz, a former large-scale property owner from Mt. Lebanon, returned to his native Brazil, and is charged in absentia with having defaulted on millions of dollars in mortgage loans.

A mortgage originator and a homebuilding executive, plus the modular home company he owned, have been indicted by a federal grand jury in Baltimore in connection with an alleged mortgage fraud scheme.

John S. Morrison IV, 55, of Columbia was indicted on two counts of mail fraud and Clifford M. Seibert, 57, of Berlin and Seibert’s company, Modular Homes Wholesaler of Berlin, were indicted on two counts of wire fraud, according to U.S. District Court records.

The indictments also seek forfeiture of $431,317 from Morrison and $363,808 from Seibert. The indictments, returned Thursday, were unsealed Monday.

Prosecutors say that in 2005, Morrison, mortgage originator, contracted to buy a building lot in Glen Rock Borough, Pa., just north of Baltimore County, for $74,900. Morrison received two documents from the owner disclosing significant problems with the steeply graded land, which would require “extensive soil and engineering work,” before it could be built on.

Morrison did not buy the property. Instead he arranged for it to be sold to an unidentified third party, but without disclosing the building problems, according to the indictment. The buyer wanted to build a modular home on the site.

Morrison and another person then prepared a $431,377 loan application to SunTrust Mortgage for the buyer, including false information about the applicant’s income, the indictment claims. Also, Morrison did not notify the appraiser of the land’s building problems. SunTrust, relying on the flawed appraisal and faulty income information, approved the loan.

The third party then purchased the land for $155,500, with Morrison pocketing $36,800 in the deal, according to prosecutors.

Meanwhile, Seibert arranged for the modular home to be built on the new owner’s property. However, despite receiving tens of thousands of dollars from SunTrust, Seibert “did little work, if any, to prepare the land for construction,” the indictment states.

As part of the scheme, Seibert “requested an advance payment of $18,575 for additional costs that would be incurred to meet the demands of the lot’s community development association, when in fact, the development association had made no such demands,” according to the indictment. SunTrust agreed to pay $16,675 of this request.

Morrison and Seibert each face up to 40 years in prison. Seibert pleaded not guilty Monday in U.S. District Court and was released on personal recognizance. Morrison was released on conditions, according to court records.

“We are mystified by the case,” said Seibert’s attorney, Joseph L. Evans of the Office of the Federal Public Defender in Baltimore.

“As we understand the case, as explained by prosecutors, it involves receiving draws prematurely, and then doing the work the draws were for,” Evans said. “The amount in question appears to be under $10,000. We are baffled as to why the U.S. government is pursuing this case.”

Morrison’s attorney, David F. Mister of Timonium, did not immediately return a phone message seeking comment.

Dallas’ 75201 ZIP code includes the snazzy Arts District, some of the city’s tallest skyscrapers and a chunk of fashionable Uptown.

The area is also ground zero for North Texas mortgage fraud.

From 2005 to 2009, more than 13 percent of the home mortgages made in 75201 turned out to be fraudulent, according to a study done for The Dallas Morning News by researchers at CoreLogic.

In most cases, the fraud came when folks buying pricey condos lied about their income or identity. Or investors claimed they were going to live in the units when they really had no such plans.

Either way, it was illegal. And surprisingly common.

Almost a quarter of the homes foreclosed across the country in recent years show evidence of loan fraud. Other common tactics have included lying about employment, hiding debts or faking assets.

Besides central Dallas, the other hot spots for home loan shenanigans that CoreLogic found include the Fair Park area (75210), sections of South Dallas (75203 and 75216), the Collin County suburb of Prosper (75078) and far southeast Dallas (75253).

It shouldn’t be surprising that a number of buyers of high-rise condos in Uptown and downtown fibbed about how much money they earned.

And a significant number of the luxury condo acquisitions were made by investors who never moved into the units.

For all the D-FW area, CoreLogic estimates that less than a quarter of a percent of the home loans made during the five-year period were fraudulent. That works out to about 22 cents for every $100 in loans.

Compare that with the national average of 0.55 percent, or 55 cents out of $100, and the D-FW area looks pretty good.

And it’s chicken feed compared with Orlando, Fla., Miami, Atlanta and Detroit, where the rate of mortgage shams was more than three times the national average.

No Texas cities made CoreLogic’s list of the top 20 U.S. locations for home loan fraud.

Florida, South Carolina, North Carolina, California and Georgia were the highest-ranking states for fraudulent mortgages.

To come up with its nationwide report, CoreLogic analyzed representative data from 80 million loan applications made from 2005 through 2009.

Researchers for the California-based housing data firm say mortgage fraud peaked in 2007.

At that time, almost 27 percent of the loans made in Dallas’ 75201 ZIP code were crooked. That was also the peak of the local home market.

“Our 2010 fraud index indicates that mortgage fraud risk is on the decline,” said CoreLogic senior vice president Tim Grace. “But with an estimated $14 billion in fraud losses experienced in 2009 alone, fraud is still a major issue for the mortgage industry.

“While the industry has done good work, there is evidence that fraud patterns are changing and becoming increasingly better hidden.”

But those shady home loans are hard to hide when they eventually wind up on the courthouse steps at foreclosure auction.

For the economy to ever have a chance at bouncing back, the issue of mortgage fraud should be addressed. With foreclosures happening left and right, different scams are coming to fore and it’s hurting the country’s chances of ever picking up from the economic slump.

Though mortgage fraud comes in different forms these days, the well-thought out plans always involve a limited liability company (LLC) or “straw buyer”.

The buyer assumes a fake identity or an identity of someone who allows his credit status to be used for a fee then purchases a home through money borrowed from mortgage lenders. The seller gets away with the cash and the buyer never makes payments on the mortgage. In the end, the lender loses.

When lenders lose in those kinds of fraud cases, the taxpayers also lose. With government support for the mortgage market, taxpayers are in turn paying to keep the housing industry afloat.

A recent example of the LLC-type of mortgage fraud is the Back of the Yards. A house on the 53rd block of South Wood Street sold for just $25,500 in January 2009. After getting $110,000 mortgage for repairs, the house went back on the market in June. The asking price is now $355,000.

Neighborhood Housing Services of Chicago’s head Emilio Carrasquillo says the sale does not make sense. It can only be a clear case of fraud.

Though mortgage fraud may not entice as much hate and rage as rape or murder, it is equally as hateful. In 2009 alone, mortgage fraud has cost the nation a whooping $14billion – hampering whatever slow recovery the housing industry is currently having.

Though the U.S. Federal Bureau of Investigation is working on putting up more defenses, the number of foreclosures is just spawning new fraud schemes. According to Carasquillo, a few Back of the Yards houses were sold for $5,000 and $30,000 last year and then resold for $385,000. Fraudsters are clearly walking away with the cash and honest home buyers are having a hard time scouting for properties to buy.

A June 17 report by the FBI shows that fraud cases are going up. From 63,700 in 2008, the number rose 5% to 67,200 a year later. The number is three times more than it had been in 2005. And the first three months of 2010 showed that the number just might be increasing, with the fraud cases totaling 38,000.

Sharon Ormsby, who is the section chief of the FBI’s financial crimes section, says that despite the FBI’s actions, fraud numbers may just keep going up if foreclosures also increase.

CHICAGO (Reuters) - The house on the 53rd block of South Wood Street in Chicago’s Back of the Yards doesn’t look like a $355,000 home. There is no front door and most of the windows are boarded up.

Public records show it sold in foreclosure for $25,500 in January 2009, then resold for $355,000 in October. In between, a $110,000 mortgage was taken out on the home, supposedly for renovations. This June, the property went back into foreclosure.

To Emilio Carrasquillo, head of the local office of non-profit lender Neighborhood Housing Services of Chicago (NHS), the numbers don’t add up. He believes this is a case of mortgage fraud.

It may not make the blood boil like murder or rape, but mortgage fraud is a crime that cost an estimated $14 billion in 2009 and could be hampering an already fragile recovery in the housing market. The FBI has been fighting back, assembling its largest ever team to fight it. They have their work cut out for them, though, as a tsunami of foreclosures is making classic scams easier and spawning new ones to boot.

“There’s no way any property in this neighborhood should sell for that kind of money,” said Carrasquillo, standing outside the house on Wood Street in this poor, predominantly black area of Chicago’s South Side. “Even if it was in great condition.”

Carrasquillo has identified a number of properties in Back of the Yards that sold for between $5,000 and $30,000 last year and then came back on the market for up to $385,000. He said property prices are being artificially inflated, allowing fraudsters to walk away with vast profits and making it harder for honest local people to buy a home.

Mortgage fraud takes many forms, but a well-organized scam frequently involves a limited liability company (LLC) or a “straw buyer.” In this scheme, fraudsters use a fake identity or that of someone else who allows them to use their credit status in return for a fee. The seller pockets the money the buyer borrows from a lender to pay for the home. The buyer never makes a mortgage payment and the property goes into foreclosure.

In other words, the money simply disappears, leaving the lender with a large loss. Since the U.S. government is now backing much of the mortgage market in the absence of private investors, that means “taxpayers are ultimately on the hook for fraud,” said Ann Fulmer, vice president of business relations at fraud-prevention company Interthinx.

Back of the Yards was hit by fraud during the housing boom and Carrasquillo says the glut of foreclosures is now making it easier for scammers to pick up properties for a song and flip them for phenomenal profits.

Drug dealers and gang members have taken over abandoned houses, many adorned with spray-painted gang signs. Prior to touring the area, Carrasquillo attached two magnetic signs touting the NHS logos on his minivan’s doors to show he is not a police officer. He said he also prefers touring in the morning, as drug dealers and “gangbangers” tend not to be early risers.

“These properties are just going to sit there, boarded up, broken into and a magnet for crime,” he said. “And that makes our job of trying to stabilize this neighborhood so much harder.”

CRACKDOWN NETS MORE REPORTS OF FRAUD

The U.S. Federal Bureau of Investigation said in a report released on June 17 that suspicious activity reports (SARs) related to mortgage fraud rose 5 percent in 2009 to around 67,200, up from 63,700 the year before. The number had tripled from 22,000 in 2005 and the number of SARs for the first three months of 2010 hit nearly 38,000.

“We don’t see the number declining while foreclosures remain so high,” said Sharon Ormsby, section chief of the FBI’s financial crimes section.

Robb Adkins, executive director of the Financial Fraud Enforcement Task Force, is known as U.S. President Barack Obama’s financial fraud czar. He describes mortgage fraud as “pervasive” and fears it is exacerbating the nation’s real estate woes. “That, in turn, could act as an anchor on the economic recovery,” he said.

For the housing market to recover, potential homeowners need confidence in home prices and investors need confidence to get back into the secondary mortgage market, Adkins explained.

Since the subprime meltdown, a wide variety of scams have come to the fore. They include big cases like that of Lee Farkas, the former head of now bankrupt mortgage lender Taylor, Bean & Whitaker Mortgage Corp, charged in June with fraud that led to billions of dollars of losses. The scheme involved the misappropriation of funds from multiple sources, including a lending facility that had received funding from Deutsche Bank and BNP Paribas.

That appears to be the scam of choice. On July 22, for instance, seven defendants were indicted in Chicago in a $35 million mortgage fraud scheme involving 120 properties from 2004 to 2008 using straw buyers. Of the half dozen properties listed in the indictment, two were in Back of the Yards.

In the mid-2000s, the availability of easy money, poor due diligence by lenders and low- or no-documentation loans, acted as a magnet for fraudsters, who used identity theft and other scams to bag large sums of cash.

“During the boom it was almost like people in the real estate market could do no wrong,” said Ohio Attorney General Richard Cordray. “As ever more money rushed in, it attracted a lot of people who engaged in shady behavior.”

Instead of leaving them without a market, the crash has instead provided fraudsters with a glut of foreclosures, stricken borrowers and desperate lenders to take advantage of.

“There were plenty of opportunities for fraud on the way up and there are plenty on the way down,” said Clifford Rossi, a former chief credit officer at Citigroup and now a teaching fellow at the University of Maryland in College Park.

By Nick Carey

One of Franklin County’s largest mortgage-fraud cases went before a judge Monday.

NBC 4 reported with the FAST FACTS from Franklin County Prosecutor Ron O’Brien.

O’Brien said John Wanek of Phoenix, Ariz., pleaded guilty to engaging in a pattern of corrupt activity that led to more than $38 million worth of mortgage fraud in Franklin County.

In Monday’s hearing, John Wanek admitted to multiple counts of theft, falsification, money laundering and telecommunications fraud.

Prosecutors say, in 2002, Wanek provided Merrill Lynch false and inflated financial information and inflated occupancy information to fraudulently obtain loans totaling $15,500,000 for two apartment complexes in Franklin County: Colonial Village and Ashberry Village.

Between 2005 and 2006, Wanek orchestrated a similar fraud on another lender, CIBC, Inc., obtaining $23,100,000 in loans to acquire four more properties in Franklin County: Hamilton Arms, Olde Cape Colony, Woodcrest, and Greene Countrie, as well as a property in Indianapolis.

In order to determine the amount of loans to be made, both lenders relied upon the false financial and rental information to determine the value of the properties.

The prosecutor’s office says the false information caused the property values to be substantially overstated. Additionally, the lenders would not have gone through with the loans if they had known the information supplied to them was fraudulent.

Wanek also is accused of secretly diverting hundreds of thousands of dollars of loan proceeds to himself between 2006 and 2008.

At the same time, the prosecutor’s office says the properties were going into decline, contractors were not being paid for their work and materials, utilities were being shut off, and payroll checks for employees were bouncing. All of the properties have since gone into foreclosure.

Wanek was charged in March of 2009 in a 33-count indictment, and was set to begin his trial Monday, Aug. 16th. Instead, he entered a guilty plea for eight counts.

He was expected to be sentenced in a couple weeks and faces a maximum sentence exceeding 50 years.

By Lauren Schmoll

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, Henry Gutierrez, Postal Inspector in Charge, U.S. Postal Inspection Service, Michael K. Fithen, Special Agent in Charge, U.S. Secret Service, and J. Thomas Cardwell, Commissioner, State of Florida Office of Financial Regulation announced that on Friday, August 6, 2010, a federal jury in Miami convicted Mayelin Salas, 36, of Miami Springs, and Lucy Segurola, 51, of Miami, for their participation in a mortgage fraud scheme that resulted in approximately $21 million in fraudulent loans. Salas and Segurola were found guilty of conspiracy to commit mail and wire fraud. Salas was also found guilty of mail fraud.

According to the evidence presented at trial, Salas was an employee of State Mortgage Lending, a mortgage lending company in Doral, which was owned and operated by Magile Cruz. Cruz previously pled guilty and was sentenced in January 2009 to 120 months’ imprisonment for her participation in this scheme. Cruz’s other companies included Star Lending Mortgage, Sherley Title Services, Doral Title Services, and Professional Title Express, all in Miami-Dade County.

According to the trial evidence, in 2005, Salas participated in a double HUD scheme through which the defendants created and submitted to Fremont Investment and Loan, a lending institution, false duplicate HUD-Settlement Statement Forms, which grossly inflated the true *purchase price of a property that Salas was purchasing. Salas received a $5,000 payment from Cruz for her participation in the scheme.

The evidence at trial established that Lucy Segurola acted as a straw borrower on at least three loans totaling more than one million dollars. Segurola allowed her credit information to be used to apply for these loans knowing that she was not the true borrower and that Cruz would be making the monthly mortgage payments. The loan applications also included false employment verifications, pay stubs, income and funds on deposit, and IRS Forms W-2. Segurola was paid a total of $15,000 for her participation in the scheme.

The defendants face a maximum term of imprisonment of twenty years as well as fines and mandatory restitution. Sentencing has been scheduled for October 22, 2010.

Mr. Ferrer commended the investigative efforts of the Federal-State Mortgage Fraud Strike Force, with special commendation to the U.S. Postal Inspection Service, U.S. Secret Service, and the State of Florida Office of Financial Regulation.

HONOLULU, HI—Two indictments of 13 Oahu residents and one from the state of Washington on mortgage fraud related charges were unsealed today with the arrests of 10 of the 14 defendants. A federal grand jury had returned the indictments on August 11, 2010, but they had remained sealed until today. One indictment charged 10 defendants in 56 counts of conspiracy, wire fraud, and false statements on loan applications, while the other named four defendants in 33 counts of the same nature. The 14 named defendants are:

* ESTRELITA “ESTHER” GARO MIGUEL (58)
* JENNIFER GARIN MIGUEL (29)
* YOLIE CASTILLO TIBURCIO (36)
* VINAH CERIALES MORALES (45)
* GERALDINE GARIN MIGUEL LUKELA (33)
* TERESITA “TESSIE” FAELDONEA SORINO (33)
* MARY ANN LAPENIA (57)
* STEPHEN ELMER CALLO (59)
* FELICIDAD “FELICIA” TABALBAG CORPUZ (60) (Washington)
* ALBERT LONOIKAUAKINI JOY (45)
* ATLANTICA KAHAUNANI “NANI” TANUVASA (37)
* LENE TANUVASA, JR. (40)
* SAMANTHA MICHEL (37)
* MICHELLE LEE MALULANI KAMA (39)

Florence T. Nakakuni, United States Attorney for the District of Hawaii, said that according to the indictments, the purposes of the conspiracies and fraud schemes were to defraud lending institutions and others by submitting loan documents containing false information. The two indictments allege that certain defendants recruited individuals to apply for mortgage loans and to sign loan documents containing false representations, and that some defendants were loan officers who submitted fraudulent loan applications. In reliance on the false statements, the lending institutions funded the loans, and some of the defendants then distributed the loan proceeds, as well as collected their standard fees and commissions.

For the conspiracy count, the defendants face a maximum period of imprisonment of five years and a maximum fine of $250,000. For the wire fraud counts, the defendants face a maximum period of imprisonment of 20 years and a maximum fine of $250,000. For the false statement on loan application charges, the defendants face a maximum period of imprisonment of 30 years and a maximum fine of $1,000,000. Charges in an indictment are merely accusations, and each defendant is presumed innocent unless and until proven guilty.

At arraignments today, trial dates were set for October 13, 2010, for the 10 and four defendant cases before Chief United States District Judge Susan Oki Mollway and United States District Judge J. Michael Seabright, respectively.

The case resulted from an investigation by the Federal Bureau of Investigation and Internal Revenue Service - Criminal Investigation Division. The prosecution is being handled by Assistant United States Attorney Clare Connors.

A Miami federal jury has found Mayelin Salas, 36, Miami Springs, and Lucy Segurola, 51, Miami, guilty in a $21 million mortgage fraud scheme.
The women were among 41 people charged in six separate mortgage fraud cases in July 2009.
According to the evidence presented at trial, Salas was an employee of State Mortgage Lending in Doral, which was owned and operated by Magile Cruz.
Cruz pleaded guilty and was sentenced in January 2009 to more than 10 years in prison.
Cruz’s other companies included Star Lending Mortgage, Sherley Title Services, Doral Title Services, and Professional Title Express, all in Miami-Dade County.
According to evidence presented at trial, Salas participated in a fraud scheme in which they provided false duplicate HUD-Settlement Statement Forms, which inflated the real purchase price of a property that Salas was buying. Salas received $5,000 from Cruz for her participation.
Segurola acted as a straw borrower on at least three loans totaling more than one million dollars and allowed her credit information to be used to apply for the loans, according to evidence presented at trial. Segurola was paid $15,000 for her participation.
The women face up to 20 years in prison along with fines and mandatory restitution. Sentencing has been scheduled for Oct. 22.

Prosecutors Believe Mortgage Fraud Is Responsible For Many Foreclosures

Many Valley families are losing their homes and their good credit scores as victims of mortgage fraud.

A CBS 5 News investigation reveals banks are doing little to help the victims.

Prosecutors believe mortgage fraud is responsible for a large portion of the foreclosures seen across the Valley. “We’re indicting more people than we ever have in the past,” said U.S. Attorney Dennis Burke, who is in charge of enforcing laws against mortgage-related fraud.

“We’ve indicted 50 people since March,” added Burke.

Sean Miller lost all of his savings — trying to save his home — and with a foreclosure on his record, his credit is shot. Burke’s office indicted the man who sold Miller his home, but Miller said the banks gave him no sympathy as a crime victim.

“I tried working with hem, but they would just not hear it,” said Miller.

Marge Peck, Miller’s realtor, tried to short-sell the house but said the bank refused to cooperate - even turning down good offers. “”Sean should not have a foreclosure, a foreclosure on a fraudulent loan. How does that happen?” asked Peck.

Miller’s home was supposed to be an investment, sold to him by a so-called friend. But the sale price was inflated by about $75,000. The scheme involved the seller, loan officer, and appraiser conspiring to make money, according to Burke’s office.

“Everybody involved in this knew there had been fraud and they didn’t care,” Peck said about the banks.

The indictment against the people involved in Miller’s case shows a total of 36-properties that were sold at inflated prices, in some cases to unsuspecting buyers.

Burke said he believes the banks should give some leeway to victims of mortgage fraud - to keep them from being victimized again.

“I think there needs to be protections for those folks, and I think that’s what the banks need to be doing,” Burke said. “There are some very sympathetic victims here, but there are also folks who were part of the scams and there were people who should have known better,” he added.

Miller cooperated with investigators, helping to catch the suspects, and held onto his house for years - before finally losing it. “I tried for almost five years to hang onto it,” he said.

“Potentially, people can go to jail for this crime, serve their sentence, get out…and still the victims have no credit,” Miller said.

California Woman, Florida Man Indicted

KANSAS CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced that a California woman and a Florida man were indicted by a federal grand jury today for their roles in a credit history fraud that allegedly contributed to a nearly $3 million mortgage fraud scheme in Lee’s Summit, Missouri.

“Credit history fraud is a new and troubling criminal scheme,” Phillips said. “By supplying false credit information, they artificially boost credit scores and create a fraudulent credit history that enables their customers to commit financial fraud. Today’s indictment marks the first time this district has charged a credit history fraud case, and signals our determination to prevent such schemes from proliferating.”

Karen Washam-Hawkins, 48, of Carson, California, and Gerald William Bartlett, 38, of Tampa, Florida, were charged in a six-count indictment returned by a federal grand jury in Kansas City, Missouri.

Washam-Hawkins, a real estate agent, allegedly obtained and sold false Social Security numbers to enable individuals to create false credit histories in order to deceive lenders and obtain loans. Bartlett, through his Tampa businesses, provided fraudulent account and payment information to a credit bureau to falsely enhance the creditworthiness of individuals in order for those individuals to deceive lenders and obtain loans.

According to today’s indictment, beginning in late 2004 to early 2005 and continuing through Aug. 15, 2006, several customers of Washam-Hawkins and Bartlett benefitted from the credit history fraud scheme in order to fraudulently purchase six properties in Lee’s Summit in a mortgage fraud scheme totaling $2,959,200.

Washam-Hawkins allegedly supplied Shade Jerome Howard of Anaheim,Calif., with false Social Security numbers. Howard then gave Bartlett those false Social Security numbers, along with other identity information, and requested positive credit information for those individuals in order to enhance their creditworthiness. Bartlett, using the names South Florida Management Group and Consumer Financial Group, allegedly reported false account and payment information to a credit bureau.

According to today’s indictment, this scheme allowed Howard, along with Ronald E. Brown, Jr., of Gladstone, Missouri, and Daryle A. Edwards of Overland Park, Kansas, to enhance their creditworthiness in order to deceive lenders and obtain mortgage loans for residential properties in Lee’s Summit. Brown purchased three residential properties totaling $1,339,700. Howard purchased two residential properties totaling $1,201,000. Edwards purchased a residential property for $418,500.

In addition to the conspiracy, today’s indictment charges Washam-Hawkins and Bartlett with three counts of transferring funds obtained by fraud across state lines. Washam-Hawkins is also charged with two counts of wire fraud.

Phillips cautioned that the charges contained in this indictment are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.

This case is being prosecuted by Assistant U.S. Attorney Linda Parker Marshall. It was investigated by the Federal Bureau of Investigation.

Defendant Used Stolen Identities for Short Sale “Buyers” When He Sought Forgiveness of $2.2 Million in Loans

ATLANTA, GA—BRENT MERRIELL, 38, of Atlanta, Georgia, was sentenced today by United States District Judge Jack T. Camp to federal prison on charges of making false statements to the Federal Deposit Insurance Corporation (FDIC) and aggravated identity theft.

“The FDIC serves a critical role by insuring the assets of hard-working Americans. Mr. Merriell used stolen identities, created fictitious buyers, and negotiated phony short sale deals for properties, all in an effort to defraud FDIC of millions of dollars he owed on mortgages,” said United States Attorney Sally Quillian Yates. “This double fraud has landed him in federal prison.”

MERRIELL was sentenced to three years and three months in prison to be followed by five years of supervised release. MERRIELL was convicted of these charges on March 23, 2010, upon his plea of guilty.

According to United States Attorney Yates, the charges and other information presented in court: MERRIELL obtained millions of dollars in loans from Omni National Bank as mortgages on numerous properties. Omni later failed and was taken over by the FDIC. Beginning in October 2009, MERRIELL faced foreclosure on 14 different properties subject to Omni mortgages. In response, MERRIELL asked the FDIC to forgive $2.2 million in loan payments and instead allow him to “short sell” the properties to seven new purchasers at significantly reduced amounts. The seven new purchasers, however, were phony: the seven names MERRIEL presented to the FDIC were, in fact, stolen identities whose names were forged on sales contracts and counterfeit loan commitment letters. Under this scheme, if law enforcement had not intervened, Merriell would have retained control of the properties, and could then rent them for amounts in excess of the substantially reduced mortgage payment, or resell them at a profit.

A “short sale” occurs when a lender such as Omni Bank agrees to the sale of property—on which the current owner has defaulted—to a third party for less than the full amount due on the loan. Lenders are willing to accept “short sales” as a means of mitigating their losses on troubled loans. The MERRIELL “short sale” fraud was discovered through a sting operation conducted by the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) with the assistance of the FDIC.

Other Omni-related prosecutions to date include:

JEFFREY L. LEVINE, 68, of Atlanta, Georgia, who pleaded guilty on January 14, 2010, to causing materially false entries that overvalued bank assets to be made in the books, reports, and statements of Omni, is scheduled to be sentenced on September 14, 2010, at 2:00 p.m., before United States District Judge Jack T. Camp.

DELROY OLIVER DAVY, 37, of Lithonia, Georgia, who pleaded guilty on May 11, 2010, to bank fraud and conspiracy to commit bank fraud, mail and wire fraud in connection with a scheme to fraudulently obtain millions of dollars of mortgage loans from Omni and other lenders, is scheduled to be sentenced on September 14, 2010, before United States District Judge Jack T. Camp.

CHRISTOPHER BERNARD LOVING, 32, of McDonough, Georgia, who pleaded guilty on June 24, 2010, to making false statements to agents of the Office of the Special Inspector General for the Troubled Asset Relief Program and the FDIC in connection with an investigation regarding Omni construction contracts, is scheduled to be sentenced on August 24, 2010, before United States District Judge Jack T. Camp.

MARK ANTHONY MCBRIDE, 44, of East Point Georgia, was sentenced on April 1, 2010, to over 16 years in prison for obtaining fraudulent loans from many lenders, including Omni.

This investigation is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

This case was investigated by special agents of a mortgage fraud task force formed for Omni-related cases, made up of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), Housing and Urban Development Office of Inspector General (HUD-OIG), the United States Postal Inspection Service, the Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG), and the Federal Bureau of Investigation. The task force is continuing to investigate a number of Omni-related matters.

Assistant United States Attorneys Gale McKenzie and Christopher Bly prosecuted the case.

For further information please contact Sally Q. Yates, United States Attorney, or John Horn, First Assistant United States Attorney, through Linda Isaac, U.S. Attorney’s Office, at (404) 581-6056. The Internet address for the HomePage for the U.S. Attorney’s Office for the Northern District of Georgia is www.justice.gov/usao/gan.

MANHATTAN SUPREME COURT — Four individuals who were part of “one of the largest and most complex” mortgage fraud cases in the country were convicted on various charges related to a massive real estate scheme, the Manhattan DA said Friday.

The four guilty defendants used a Long Island-based mortgage company to convince banks to front them massive loans so they could purchase distressed properties, but instead they pocketed most of the money, according to prosecutors.

Aaron Hand, 38, Eric Shields, 45, Kenneth Law, 54 and Jerry Strklja, 35, were convicted on Friday after a month-long trial.

They were charged with stealing $100 million from banks and for defrauding home sellers, including some in Manhattan, prosecutors said.

“These defendants built a corrupt enterprise — complete with corrupt lawyers, bankers, appraisers, straw buyers and others — to control every aspect of the residential lending process,” District Attorney Cy Vance Jr. said in a statement.

They all face up to 50 years in prison when they’re sentenced in September.

Ten others who were indicted as part of the fraud pleaded guilty earlier this month.

By Shayna Jacobs

Certain U.S. markets are expected to continue to see incidents of mortgage fraud grow. In fact, LexisNexis Risk Solutions has identified five markets in Florida as being the weakest and most vulnerable to mortgage fraud. Other markets listed as targets for fraud include cities and suburbs in New Jersey, Virginia and Arizona.

Despite continual increases in foreclosure rates, criminals and con artists are taking advantage of these markets’ conditions by focusing on new types of scams like rescue schemes, which often involve the purchase of a home from a lender whose about to go into foreclosure.

In this exclusive interview, Jennifer Butts, an author of the Mortgage Asset Research Institute Annual Case Report on Mortgage Fraud, which is published by LexisNexis’ Mortgage Asset Research Institute, shares insights from her research regarding:

* New fraud schemes hitting the market, as well as traditional schemes that continue to plague lenders;
* The transparency and standardization benefits that collaboration between Fannie Mae and Freddie Mac are expected to bring to lending and appraisal practices;
* How financial institutions can do a better lending job when they identify risks and verify transaction participants.

Butts manages the research, processing and presentation of all data maintained by the Mortgage Asset Research Institute, a group within LexisNexis Risk Solutions that is devoted to the use of information for mortgage fraud detection and prevention. She is an author of the MARI Annual Case Report on Mortgage Fraud, as well as other periodic fraud trend analyses. Butts is a frequent industry speaker and contributor on issues facing the mortgage industry. She has been quoted by industry and mainstream press, such as such as the Associated Press, USA Today, CNN Money, The Washington Post and the Los Angeles Times. She is a member of the Mortgage Bankers Association Fraud and Ethics Committee and the Quality Assurance Subcommittee, for whom she frequently presents mortgage fraud trends.

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida; John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation, Miami Field Office; Henry Gutierrez, Postal Inspector in Charge, U.S. Postal Inspection Service; J. Thomas Cardwell, Commissioner, State of Florida’s Office of Financial Regulations; Amos Rojas, Jr., Special Agent in Charge, Florida Department of Law Enforcement; and Alex Sink, Chief Financial Officer, Florida Department of Financial Services, announce the July 6, 2010 filing of a criminal information against defendant Stanley Gabart, 29, of Miami, FL. The defendant surrendered on Thursday, July 8, 2010, and made his initial appearance in West Palm Beach federal court.

The two-count information charges defendant Gabart with conspiracy to commit bank fraud and making false statements on loan applications to Bank of America and JP Morgan Chase Bank, N.A., in connection with the purchase of various properties. If convicted, the defendant faces a maximum statutory term of imprisonment of 30 years on each count.

Among the properties listed in the information are 3586 Royalle Terrace, Wellington, Florida; 10475 Trianon Place, Lake Worth, Florida, and 540 West Avenue, #1414, Miami Beach, Florida. According to the allegations in the information, Gabart conspired with others to submit loan applications for the properties that contained false information about the applicants’ employment, income, assets and intention to live in the homes. In addition, Gabart allegedly recruited straw purchasers and paid the straw purchasers a fee for participating in the scheme. The fraud scheme resulted in more than $7 million in losses to several banks.

This case is the result of the investigative efforts of the multi-agency Palm Beach Mortgage Fraud Task Force. Mr. Ferrer commended the investigative efforts of the FBI, U.S. Postal Service, State of Florida’s Office of Financial Regulation, FDLE, and State of Florida’s Department of Financial Services. The case is being prosecuted by Assistant U.S. Attorney Ellen Cohen.

An information is merely an accusation and a defendant is presumed innocent unless and until proven guilty.

A copy of this press release may be found on the website of the United States Attorney’s Office for the Southern District of Florida at www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the United States District Court for the Southern District of Florida at www.flsd.uscourts.gov or http://pacer.flsd.uscourts.gov.

A Buffalo, Minn. man pleaded guilty Thursday over his involvement in a mortgage fraud scheme that lost at least $20 million for lenders, the Minnesota U.S. Attorney’s Office said.

Richard Mathew Laho, 54, pleaded guilty in St. Paul’s U.S. District Court to one count of mail fraud, a felony that carries a penalty of up to 20 years in prison.

Prosecutors said Laho admitting taking part in a Naples, Fla. real estate deal in March and April of 2007 that bilked the mortgage lender out of as much as $690,000.

The deal was one of 70 residential purchases in Minnesota and Florida between December 2006 and April 2007.

Judge Paul Magnuson will sentence Laho at a date to be scheduled.

Co-defendant Michael Anthony Prieskorn, 35, of Ellendale, has also entered guilty pleas in the case. He was arrested by IRS agents in January.

Prieskorn, who operated under the business names Blackstone Sales and Maine Estates, worked with Laho, a mortgage broker, to solicit investors who acted as “straw buyers” — and were paid $5,000 for every home loan taken out in their name.

According to prosecutors, Prieskorn promised to investors that he would make mortgage loan payments for at least nine months, but then failed to do so. Instead, he paid himself “management fees” ranging from $18,000 to $228,000 per property.

The investors’ credit ratings were damaged as the homes they bought went into short-sales and foreclosures. Prosecutors say Prieskorn and Laho engaged in activities to deceive the lenders they were obtaining the mortgages from, including temporarily depositing money into investors’ bank accounts to make it look like they had more assets, and advising investors to misrepresent the true nature of the real estate transactions on HUD-1 forms.

By Jim Hammerand

After a three-day trial, a jury in federal district court returned a guilty verdict yesterday against Emanuel County, Georgia attorney John R. Thompson on mortgage fraud charges. The case was tried before District Court Judge B. Avant Edenfield at the U.S. Courthouse in Statesboro, Georgia.

United States Attorney Edward J. Tarver stated, “Mortgage fraud is a cancer in our society which must be cured. In this case, a lender relied upon this defendant as their closing attorney and agent and he was in a position of trust. For his criminal violation of that trust for profit, he will soon face a prison sentence.”

According to the evidence presented at trial, Thompson, along with his coconspirators, Brian and Natasha Steptoe, sold a piece of property located in Swainsboro, Georgia, in August of 2007 to what is known in real estate terms as a “straw purchaser.” Thompson and the Steptoes submitted a falsified loan application and supporting documents Bank of America in order to obtain a loan for the purchaser of the property. Based on the lies contained in the loan application and other documents, Bank of America approved a mortgage loan for over $400,000. Thompson and his coconspirators pocketed large sums of money for themselves as a result of their scheme. Soon after the property was sold, it went into foreclosure and remains on the market to this day.

Evidence presented at trial also established that Thompson and his coconspirators committed additional acts of mortgage fraud from October 2006 through May 2008, which included defrauding people out of their money while conducting real estate closings.

U.S. Attorney Tarver recognized the extensive efforts of the Federal Bureau of Investigation in bringing this criminal activity to light. He praised particularly the efforts of Statesboro F.B.I. Special Agent Cornelius Harris, who investigated this matter.

The case was prosecuted by Assistant United States Attorneys Natalie Lee and Frederick Kramer. For additional information, please contact First Assistant United States Attorney James D. Durham at (912) 201-2547.

Mortgage fraud is a growing problem according to the Department of Consumer Affairs. Scammers are targeting homeowners behind on their payments. They claim to modify your loan. But they charge you up front, and have nothing to show for it.

Margaret Alexander is battling cancer and has been unable to pay her mortgage while on disability. She thought an offer for a loan modification would keep a roof over her head.

“Here is this company saying we can help you with your modification get your payment knocked down, get my payment lowered and I’m like, wow, that’s what I need,” said Alexander.

She paid nearly $700 dollars upfront, but the loan modification company has only made her money problems worse.

“These scam companies know that all they have to do is fax in one paper and they say, ‘Well we tried, yeah, we got authorization and that’s it.’ They have no intentions of actually trying to get the consumer modification whatsoever.”

Scott McHam with the Urban League of the Upstate has jumped in to help Margaret and numerous other clients for free. He says Mortgage Fraud is a growing problem in the Upstate.

What’s worse is Alexander is now being harassed with letters claiming the company will garnish her wages if she doesn’t pay more. McHam says that’s illegal.

The Urban League says you should also beware of any company that tries to get you to turn over the title to your house. They may charge you a cheaper rent in exchange, but the only business that can do that legally, is your own mortgage company.

“I really don’t want to lose it, but right now, that’s exactly where I’m headed,” said Alexander.

She’s grateful to have the help of the Urban League of the Upstate, and hopes by speaking out she can save others from becoming victims of Fraud.

The Urban League has joined forces with other agencies like the Department of Consumer Affairs and HUD to create what they call a “Scam Network.”

That network lists all the companies who have committed fraud on the website: http://www.preventloanscams.org/

If you’ve been a victim you can also call the mortgage fraud hotline at 800-553-7723.

By Diane Lee

A Dallas federal judge ordered former Cowboys linebacker Eugene Lockhart, who is awaiting trial on mortgage fraud charges, released from custody Friday evening after he was arrested earlier in the day for failing a court-ordered drug test.

After his arrest in September 2009 on the mortgage fraud charges, Lockhart was ordered to submit to drug testing in exchange for his remaining free until his trial, which is set for October. But after he failed to show up on time for several of the drug screenings, and then tested positive for cocaine in May, prosecutors obtained an arrest warrant.

At Friday’s hearing before U.S. Magistrate Judge Renee Harris Toliver to determine whether Lockhart was to remain in custody until his trial, federal prosecutor David Jarvis argued that the former Cowboy was “gaming the system” by showing up for drug tests several days after he was supposed to, allowing time for drugs to clear from his system.

Lockhart’s attorney, Jay Ethington, argued that Lockhart was a busy man and didn’t show up on time because he was at youth football camps, doing charity work and attending seminary school.

Toliver ordered that Lockhart could remain free pending trial but told him to get permission from federal probation authorities if he wishes to leave Collin County, where he lives. She also ordered him to get a drug evaluation and begin treatment if necessary.

“This was a very close decision for me,” Toliver told Lockhart. “I’m really concerned you are in a position where you think you make the rules. You don’t make the rules.”

After the hearing, Ethington denied Lockhart has a drug problem but said his client was “relieved” that the judge, newly appointed to the bench, “showed mature judicial temperament.”

By JASON TRAHAN