Brandon Foley, an owner of Smart Choice Realty, has agreed to plead guilty in a mortgage fraud conspiracy, operating what prosecutors call a “builder kickback” scheme in Mecklenburg County.

The Charlotte real estate agent, served as an agent for deals in which a builder “agreed to pay hidden kickbacks to buyers and promoters who recruited buyers,” according to court documents filed Monday. He was involved in the fraud ring for more than two years, starting about September 2005, documents say.

Foley is charged with one count of mortgage fraud conspiracy. He faces up to five years in prison and a maximum fine of $250,000. He declined to comment saying his attorney advised him not to discuss his case. A date in January 2010 is yet to determined for his plea to be heard.

The conspiracy generally involved an unidentified builder that had “numerous houses that were not selling at the desired price,” according to court papers. To stimulate sales, “Builder A” agreed to pay kickbacks, which were not listed on closing documents.

As the real estate agent, Foley “facilitated the hidden kickbacks,” the documents say.

Prosecutors say Foley’s case is not related to the “Waxhouse Investigation,” a mortgage fraud case in which 12 people have agreed to plead guilty since last year.

However, there are similarities, based on filings in the cases. For example, in both, participants lied to get mortgages, including misrepresenting buyers’ income, place of employment and intent to occupy the house as a primary residence.

In the Foley case, conspirators also used false identification, such as fake Social Security numbers, the filing says.

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Following a two-week trial, a jury in federal district court returned guilty verdicts late Monday afternoon against Keith Garner, Gregg Savage, Shalonda Harris, all of Atlanta, Georgia, and Latesha Garner, of Durham, North Carolina, on charges of conspiracy to commit mortgage fraud and wire fraud related to $6 million in fraudulent real estate financing from SunTrust Mortgage Company over a ten week period in the summer of 2006.

According to court documents, Keith Garner, 48, solicited his daughter, Latesha Garner,27, a loan processor with SunTrust Mortgage, in the spring of 2006 to handle fraudulent loan applications submitted on behalf of straw borrowers recruited by the elder Garner and his co-conspirators. Because she was responsible both for verifying borrower employment and asset information as well as for approving closing documentation, Latesha Garner was uniquely positioned to defraud SunTrust Mortgage, which she did by falsely verifying borrower credentials and approving hundreds of thousands of dollars in false payoffs to her father.

Keith Garner paid Latesha $33,000–the equivalent of one year’s salary–across four transactions to facilitate his criminal scheme. He also enlisted the help of Susan Khodadad, a closing paralegal with several area real estate firms, to ensure that the false payoffs to Garner and his co-conspirators were included in SunTrust Mortgage’s loan documentation. Khodadad pleaded guilty to the conspiracy count of the indictment prior to trial and testified against her co-conspirators.

Focusing on the “Country Club of the South” and other high-end developments and subdivisions in the Atlanta area, Keith Garner and his fellow fraudsters acquired numerous properties in the name of their straw borrowers, often without the straw borrower’s consent. Each of the properties was accompanied by an inflated appraisal, which, in addition to the submission of false loan applications, enabled Garner to secure real estate financing from SunTrust Mortgage in excess of the fair market value of the properties. He then stole the “spread” between the inflated and fair market value of the properties primarily through Latesha and Khodadad, who ensured that SunTrust Mortgage either directly paid a bogus seller’s obligation or was never made aware that a substantial portion of seller’s proceeds was being paid to the defendants outside of closing pursuant to a criminal agreement with the seller.

Gregg Savage, 24, was convicted of realizing more than $830,000 in false profits in just seven days as a seller of two properties, from which he paid Keith Garner $200,000 for supplying the straw buyers. Shalonda Harris, 36, a licensed REALTOR, was convicted of receiving $66,000 from Keith Garner and Savage related to her role in locating properties and straw buyers on two indicted transactions.

Each faces a 20-year prison term and $250,000 fine on the conspiracy count of the indictment and a separate 20-year prison term and $250,000 fine on each of their wire fraud convictions. A sentencing date has not yet been scheduled.

• Mortgage Fraud Law Goes into Effect in North Carolina: Among the list of new laws taking effect tomorrow in North Carolina–a law making it easier to prosecute residential mortgage fraud by defining the practice and creating tougher punishments for repeat offenders.
• Mortgage Inquiries Swamping Arizona: Arizona’s mortgage regulator has shut down a handful of firms for fraud and other illegal lending practices this year, but at least 40 other investigations are stalled because there is no money to fund them.
• California Real Estate Firm Investigated for Fraud: Federal investigators are looking into Crisp & Cole Real Estate’s operations for possible mortgage fraud after a federal raid of 13 of the now-defunct California company’s offices.
• New Jersey Lawyer-Judge at Center of Land-Flip Investigation: A NJ lawyer who is also his town’s judge may have played a central role in a scheme to defraud lenders by obtaining mortgages based on inflated appraisals of run-down properties.
• Minnesota Mortgage Firm is the Focus of Fraud Probe: Investigators are probing mortgage fraud complaints involving Universal Mortgage and several of its employees that are said to have used straw buyers to buy property at inflated prices.
• Guilty Plea Entered in Missouri Fraud Case: A 30-year-old man from St. Louis is the fifth person implicated in a mortgage fraud ring involving dozens of homes and millions of dollars in real estate transactions dating back to 2005. Daniel Mann pleaded guilty to conspiracy to commit wire fraud and now faces a maximum penalty of five years in prison. Mann admitted to arranging a number of fraudulent real estate transactions that were part of a larger fraud ring coordinated by another person who pleaded guilty in September to similar charges and will be sentenced in December.
• Canadian Paralegal Convicted in $30 Million Mortgage Fraud Scam: An Edmonton fraudster has been convicted of supporting a criminal organization by helping to swindle unsuspecting real estate investors out of nearly $30 million. Sixty-one-year-old Terry Ellis was found guilty of 12 counts of fraud and one count of forgery in connection with a massive mortgage fraud believed to be the biggest in Alberta history.
• Editorial Questions Michigan Attorney General’s Record on Real Estate Fraud: In the state hardest hit by real estate and mortgage fraud-related foreclosures, its attorney general, Mike Cox–who has won nationwide notoriety for locking up parents behind in their child support payments–has yet to file a single criminal complaint against any mortgage broker or lending entity.
• Two Sentenced in Connection with $15 Million Mortgage Fraud Case in Ohio: Two people have been sentenced to prison in connection with what prosecutors describe as a mortgage fraud scam in upscale Cleveland suburbs. Builder and developer, Edward Emery received a sentence totaling 34 months and a fine of $10,000. Eloise Anderson will spend nearly a year in prison and has been ordered to pay $35,000 in restitution.

Many people believed this day would never come, but exactly one year to the day from when he was apprehended by Federal authorities, this nation’s most notorious Real Estate and Mortgage Fraud-related criminal has finally been sentenced for his role in a brazen string of acts that stunned nearly everyone who had ever played a hand in Real Estate and Mortgage Fraud forensics.

Thirty-eight-year-old Matthew Bevan Cox, the poster child for Real Estate and Mortgage Fraud in this country… the same man who kept federal authorities at bay for over three years and was the subject of an intense nationwide manhunt (and whose face landed on the U.S. Secret Service’s list of the Most Wanted Fugitives for his role in numerous Real Estate and Mortgage Fraud scams)… cried like a little baby in U.S. District Court in Atlanta yesterday afternoon, and was promptly sentenced to serve 26 years in Federal prison AND pay his victims up to $12 million in restitution.

For those of you who have never heard Matthew Cox talk about his crimes, the following clip, from NBC affiliate WSMV-TV in Nashville, Tennessee, will give you a small taste of what was going his mind:

Matthew Cox was indicted by a Federal grand jury in Atlanta in late-September of 2005 on 42 counts of mortgage fraud, identity theft, money laundering, and conspiracy. The Middle Districts of Tennessee and Florida filed criminal charges against Cox in April of this year, charging him conspiracy to commit mortgage fraud, aggravated identity theft, and passport fraud.

Cox, who was pleaded guilty to all charges on April 10th of this year, was apprehended on November 16, 2006 in Tennessee after a Nashville man read about him in a local newspaper and tipped off U.S. Secret Service agents. In the world of Real Estate and Mortgage Fraud forensics, no one person’s name sends a shiver up the back of a spine more so than Matthew Cox, who was also known as Maxwell Price, David Richard Freeman, Gerald Scott Cugno, Michael Shawn Shanahan, Gary Lee Sullivan, Michael John Eckert, Michael White, Kevin White, David White, James Redd.

Matthew Cox used stolen identities to obtain drivers licenses, purchase vehicles, lease mail drops, rent apartments, and open bank accounts to receive Real Estate-related scheme proceeds throughout the states of Georgia, Florida, Alabama, South Carolina and North Carolina. Cox’s accomplice in many of his scams– Rebecca Marie Hauck–was sentenced on November 15, 2006 (the day before Cox was captured) by a U.S. District Judge in Georgia to serve 5 years and 10 months in prison for her role in the now infamous string of mortgage and bank fraud-related crimes.

How Cox be able to afford the $12 million he was ordered to pay in victim restitution is anyone’s guess, but despite his wicked ways, Matthew Cox was–and may still be–a talented writer and artist who just so happened to leave behind a number of works. According to WXIA-TV in Atlanta, a representative of the victims is planning to offer, perhaps as soon as this coming week, four of Cox’s paintings for sale on eBay, with 100 percent of the proceeds going into the victims’ restitution fund. Cox did signed away the rights to his future works, including any additional paintings and unpublished novels, past and future, to his victims’ restitution fund, so that too may provide some relief.

For now, we can all sleep a little better at night knowing that Matthew Cox is finally paying for his crimes. That said, 26 years in prison and $12 million in fines may not be enough for this guy or the others who try to follow his example.

The Chief U.S. District Court Judge for the Eastern District of North Carolina has placed three companies on probation for five years, ordered them to pay restitution in the amount of $7,500,292.72, and ordered each to forfeit all of their property.

Donald Gupton, a prominent business man in Henderson, North Carolina, was president of Donald W. Gupton, Inc., which owned and operated the three companies–Dynasty Homes of Henderson, Superior House Center, and Creative Real Estate and Manufacturing Housing Sales Center. Personally, Gupton was charged and pled guilty to conspiracy to commit mail fraud, wire fraud and making material false statements as well as conspiracy to commit money laundering. His sentencing for his personal role in the scam was continued to the January 2007 term of court.

Richard Meador, of Kittrell, North Carolina, and Donald Carroll, of Henderson, North Carolina, both of whom worked for Gupton’s companies, were previously sentenced in late-September for their role in Gupton’s scams. Meador received a sentence of 53 months in prison, three years’ supervised release, and was ordered to pay restitution in the amount of $1,270,299.74, while Carroll was sentenced to serve 30 months in prison, three years’ supervised release, and was ordered to pay restitution in the amount of $1,476,830.59.

According to documents and information disclosed in court proceedings, all three men falsified information on loan applications, provided false trade-in information and titles, provided false gift letters, and false down payment information on loan applications for prospective applicants. This was done so the buyer/borrower would have a lower ‘debt to income ratio,’ qualifying them for a loan. Between 1999 and 2002, the three scammers sold in excess of 150 manufactured homes resulting in HUD mortgages exceeding $11,000,000. The total loss to all lenders is estimated to exceed $19,000,000.

Gupton used the proceeds from the fraudulent loan activity to purchase real and personal property for himself and to purchase properties placed in the names of CRE Properties, LLC and M & G Porperties II, Inc. The proceeds were also used to pay employee commissions, bogus gift funds and business expenses.

The joint prosecutorial effort by the U.S. Attorney’s Office, HUD’s Office of Inspector General, the Internal Revenue Service’s Criminal Investigation Division, and the North Carolina Real Estate Commission has helped send a strong message that those who seek to unlawfully profit by defrauding programs within HUD will be vigorously investigated and prosecuted.

Rebecca Marie Hauck–who has been called the ‘better half’ of a Bonnie & Clyde team that is credited with committing more real estate and mortgage fraud-related crimes than you can shake a stick at–was sentenced yesterday afternoon by a U.S. District Judge in Georgia to serve 5 years and 10 months in prison for her role in a string of mortgage and bank fraud-related crimes.

As most Flipping Frenzy readers already know, Hauck was involved in fraud schemes that resulted not only in millions of dollars in losses for innocent homeowners and banks, but she also snarled property titles on residences throughout the southeastern part of the United States. Hauck and co-defendant Matthew Cox (who is still on the loose, by the way) stole homeowners’ identities and placed multiple loans on houses they did not own, which created a level of havoc that is still being felt across five southeastern states.

Hauck, who is just 34-years-old, will serve her time in a federal prison, followed by five years of supervised release. She was also ordered to pay restitution of $1,197,970.00, and was ordered to forfeit any profits from book, television or any entertainment rights she secures here in the U.S.

According to the information presented in court, Hauck and co-defendant Cox fraudulently erased mortgage liens on rented properties. In the process, they stole the identities of the people from whom they rented, and frequently obtained multiple new mortgage loans on the properties. After they executed the scheme in one location, they changed locations and did the same thing over and over again. Hauck and Cox used stolen identities to obtain drivers licenses, purchase vehicles, lease mail drops, rent apartments and open bank accounts to receive scheme proceeds throughout the states of Georgia, Florida, Alabama, South Carolina and North Carolina.

Hauck was indicted in late-September of 2005 on 42 counts of bank fraud, wire fraud, interstate transportation of fraud proceeds, identity theft, money laundering and conspiracy. Her indictment, which was unsealed in March of this year when the U.S. Secret Service arrested her in Houston, Texas, came as a wake-up call to some real estate industry insiders.

For his part, 36-year-old Matthew Cox–whose known aliases include Maxwell Price, David Richard Freeman, Gerald Scott Cugno, Michael Shawn Shanahan, Gary Lee Sullivan, Michael John Eckert, Michael White, Kevin White, David White, and James Redd–is alleged to have obtained a number of the stolen identities from homeless people by posing as a Red Cross worker taking a survey. According to the U.S. Secret Service, he has used elaborate schemes to avoid capture, including obtaining state-issued and counterfeit driver’s licenses. He has not used his true name since 2003, and is believed to be armed and dangerous. Law enforcement is seeking the assistance of the real estate industry in locating Cox, who has been a fugitive since December of 2003. Anyone with information about Matthew Cox’s whereabouts can contact the Secret Service toll-free, 24 hours a day, by calling 1-877-242-3375.

A couple of days ago I mentioned that the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) reported that mortgage loan fraud in the United States rose 35 percent in the past year. For anyone interested, here are some additional items of note from the FinCEN’s November 2006 report:

• Between 1997 and 2005, Suspicious Activity Reports (SARs) pertaining to mortgage loan fraud increased by 1,411 percent between. This report-filing trend continues apace in 2006, with 7,093 reports filed on suspected mortgage loan fraud during the first quarter, an increase of 35 percent over the SAR filings in the first quarter of 2005. One explanation for the increase in SARs reporting mortgage loan fraud is increased awareness of the potential for fraud in a dynamic real estate market. Many areas in the United States saw double-digit growth in real estate values during 2003 and 2004. At the same time, mortgage loan interest rates were at a historic low. Although growth in the housing industry appears to be slowing in the first quarter of 2006, opportunities for fraud are still present.
• Reports of mortgage loan fraud rose significantly in 2003. The Federal Financial Institutions Examination Council reported an increase in the number of mortgage loans beginning in 2003: “The 2003 data include a total of 42 million reported loans and applications, which is an increase of about 33 percent from 2002, primarily due to a significant increase in refinancing activity (approximately 41 percent).” SARs on mortgage loan fraud increased over 92 percent between 2003 and 2004. The increase in filings may be attributed to an increase in overall mortgage lending concurrent with the decline in interest rates in the 2002 – 2005 timeframe and a broader awareness of this fraudulent activity.
• Mortgage loan fraud represents a growing percentage of total depository institution SARs. In 1997, reports of mortgage loan fraud comprised 2.12 percent of total depository institution SAR filings. In 2005, reports of mortgage loan fraud had increased to 4.94 percent of total depository institution filings.
• Identity theft was frequently reported in conjunction with the commission of suspected mortgage loan fraud. Reports of identity theft increased nearly 102 percent between 2004 and 2005.
• The National Association of Mortgage Brokers reports that as many as two-thirds of mortgage loans are now originated by mortgage brokers. Currently there are no national standards for licensing and oversight of mortgage brokers. Some states license mortgage brokerage offices, but not individuals; 24 states have no specific educational or experience requirements for mortgage brokers; and only a few states require criminal background checks on mortgage brokers making it possible for unethical individuals to move from one mortgage brokerage firm to another.
• The top 10 geographical areas for fraud are California, Florida, Illinois, Texas, Georgia, Michigan, New York, Ohio, Washington, and North Carolina.
• High home prices coupled with rising mortgage rates result in a reduction in housing affordability. In response to this trend, the housing industry is expecting a slow down in mortgage loan originations, a decrease in housing sales, and a slowing in housing price gains. The slow down in the growth of housing prices could result in the housing industry becoming less attractive to investors, which in turn could result in a reduction in the reports of fraud for profit. The current housing trend could also lead to an increase in fraud for housing as the increased costs of housing decreases the number of persons who qualify for mortgage loans. The current trend of rising interest rates and slowing housing equity growth could result in an increase in debt elimination fraud schemes, especially for homeowners with adjustable rate mortgages and interest only loans.

With fewer houses selling, increases in foreclosures and real estate prices dropping, the housing market is experiencing the “soft landing” that has been long predicted, and the mid-western United States is once again the most vulnerable part of the country when it to real estate fruad. Earlier this week, CoreLogic released the latest edition of the Core Mortgage Risk Monitor, a report that forecasts the geographic regions most likely to experience the economic consequences of increased levels of fraudulent activity over the next 12 to 18 months.

According to the latest report, the risk index rose by 5 percent between the first and second quarters of 2006, after increasing by 6.4 percent between the fourth quarter of 2005 and first quarter this year. This increase indicates that the risk of real estate and mortgage fraud causing economic impact in vulnerable markets continues to rise at an unprecedented rate.

The top five major metropolitan statistical areas most at risk are:

1. Detroit-Livonia-Dearborn, Michigan
2. Memphis, Tennessee
3. Dayton, Ohio
4. Akron, Ohio
5. Gary, Indiana

The top five markets showing the most noticeable increase quarter over quarter are:

1. Gary, Indiana
2. Detroit-Livonia-Dearborn, Michigan
3. Goldsboro, North Carolina
4. Flint, Michigan
5. Florence, South Carolina

The Core Mortgage Risk Monitor measures what we call ‘collateral risk,’ which is the risk associated with the accuracy of a residential property valuation and the sustainability of that valuation over the life of the mortgage due to the unique characteristics of the property, market, and mortgage contract participants.

A jury in North Carolina has convicted a 60-year-old Raleigh man of conspiracy, making false statements on real estate closing documents, wire fraud, and mail fraud. The Greenville, NC, jury returned its verdict following a four-day trial in federal court.

James Davis was convicted of a conspiracy and fraud scheme involving newly built houses in Raleigh, Garner, and Wake Forest, NC. Davis claimed to be a real estate “consultant” and ran businesses called “Easy Financial Service” and “Eagle Investments Club.” According to court-related documents, Davis and others defrauded mortgage lenders by submitting false and misleading documents–particularly HUD-1 settlement statements–to induce the lenders to make loans to borrowers recruited by Davis. Among the false statements in the documents were inflated sales prices, backed by appraisals, down payments secretly provided by the seller, and hidden cash kickbacks to Davis himself.

Davis also defrauded individuals who were told that they could “lease-to-own” the houses until their credit was repaired. These victims lost thousands of dollars in down payments and monthly payments they believed would be applied to a house purchase.

In addition to Davis, a Raleigh-based residential house builder named David Lawton was charged in the case. In April of this year, Layton pled guilty to conspiring with Davis to make and use false documents at closings where Layton was the seller. Layton testified at trial to the fact that he and Davis had created fake sales prices based on appraisals rather than a bargain between a real buyer and seller.

Sentencing for both men takes place this fall. Layton is scheduled to be sentenced on September 5, 2006, while Davis’ sentencing is slated for the week of November 6, 2006.