Mortgage Fraud “Straw Buyer” Cases Are Major Target of Federal Fraud Investigations
Back in July 2013, we pointed out how mortgage fraud indictments have become a big part of federal arrests, investigations, plea deals, and trials and that media coverage will be reporting on a lot more federal mortgage fraud cases after Teresa Giudice and her husband, Giuseppe “Joe” Giudice, who appear in the reality show “The Real Housewives of New Jersey,” were charged with mortgage fraud involving “a conspiracy to defraud lenders and illegally obtain mortgages and other loans” (along with charges of bankruptcy fraud and failure to file federal income tax returns.
Here in October 2013, a quick glance around the national news stories published on the internet reveals that a lot of federal energy, including the Department of Justice and the Federal Bureau of Investigation (FBI) specifically, has been spent on tracking down instances of alleged violations of federal mortgage laws and indictments, often based upon millions of dollars in home loans, resulting in arrests all around the nation.
Straw Buyer Mortgage Fraud is Target of Indictments All Over the Country
Consider these stories, all involving the allegation that a “straw buyer” was used in fraudulent mortgage transactions where lenders are the named victims of these mortgage schemes. Note how each of these people have made plea deals with the federal prosecutors – and that all of them are at least 50 years old (with one exception who is 44 yrs old) — and that in Arizona, a 69 year old real estate developer has just been sentenced to 2 years in a federal prison.
Mortgage fraud defendants are often older, established professionals. People with an education, a family, and a resume that includes work as developers, brokers, real estate agents, mortgage company officers, or bank officers.
For more on the intricacies of mortgage fraud, check out our web page discussing mortgage fraud or read Michael Lowe’s case result in a Dallas mortgage fraud case “LESS THAN ONE HALF GUIDELINE SENTENCE ON DALLAS FEDERAL MORTGAGE FRAUD CASE” as an example of defending against these charges.
1. Dallas, Texas: Straw Buyer Mortgage Fraud
This month, Eric Damon Johnson, 51, and Tracie Elaine Stenson, 50, both of Dallas, were sentenced by U.S. District Judge David Godbey to pay $3,753,539 in restitution and to serve 48 months (Johnson) and 57 months (Stenson) after they had pled guilty to federal mortgage fraud charges (wire fraud).
According to news reports, these two acted through their company, Bridgemark Investment Group, to get mortgage loans that were higher than the sales prices for those homes. They also allegedly submitted fake invoices for construction upgrades and repairs on the properties.
BIG recruited individuals to purchase residential real estate as “investors,” and Johnson and Stenson promised investors that BIG would find tenants to rent the property and make the mortgage payments. Johnson and Stenson agreed to make payments to the “investors” when the loan closed that were not disclosed to the mortgage lender on the HUD-1 Settlement Statement. Stenson prepared false loan applications for the investors that included, among other things, material misrepresentations regarding the borrower’s monthly income, intention to occupy the property, assets, and liabilities. The loan applications were submitted to residential mortgage lenders, who on the basis of the false statements in the loan applications, agreed to fund primary and secondary mortgages for residential real estate properties.
2. Tucson, Arizona: Straw Buyer Mortgage Fraud
Last week, real estate developer William Michael Naponelli, 69, and real estate agent Bryan Atwood, 52, were sentenced by a federal judge after they pled guilty to federal charges of involvement in a mortgage fraud scheme. Naponelli was sentenced to 24 months; Atwood, to 15 months in prison on charges of bank fraud (Naponelli) and wire fraud (Atwood). Naponelli was also order to pay $3,100,000 in restitution to the banks that loaned the money; Atwood was also ordered to pay restitution ($585,000).
Here, it is reported that Naponelli and another co-conspirator who was an Arizona real estate developer bought properties which they sold to straw buyers; the straw buyers got their mortgage loans based upon fake loan application documentation and after the loan money arrived, some of the money was split among the conspirators.
3. Camden, New Jersey: Straw Buyer Mortgage Fraud
Paul Watterson, 53, and John Bingaman, 44, pled guilty in a New Jersey federal court a couple of weeks ago and now await sentencing in March 2014 by a federal district judge based upon federal allegations that Watterson, as a property manager, and Bingaman, as a straw buyer, were part of a mortgage fraud scheme where fake loan applications were presented to lenders in order to get mortgages on condominiums. The straw buyers here had good credit ratings, but insufficient income for the banks to lend them a home mortgage, so the numbers were fudged (along with things like employment history, assets, and such). Once the mortgage money was lent, cash was split among the alleged co-conspirators. It’s reported that the court filings show that Watterson got $273,600 this way while Bingaman got $241,789.98.
4. Chicago, Illinois: Straw Buyer Mortgage Fraud
Last week, 10 people were indicted in an Illinois federal court for their alleged participation in a big Chicago mortgage fraud scheme where over 50 mortgages were obtained from several different banks through straw buyers who qualified for the home loans through fake paperwork with the defendants profiting from the scheme. According to news reports, the lenders (and those who bought the loans in the secondary market) were then harmed by over $8,000,000 when they couldn’t recover the amount of the home loans after foreclosing on the properties.
5. Las Vegas, Nevada: Straw Buyer Mortgage Fraud
Today, Mary Armstrong, 52, was sentenced in a Las Vegas federal court as the alleged “mastermind” of a Nevada mortgage fraud scheme; she was ordered to serve 8.5 years in a federal prison and to pay $500,000 in restitution based on charges of wire fraud and money laundering (as well as conspiracy).
According to news stories and the Justice Department news release, Armstrong was the brains behind a plan to use straw buyers to get home loans based upon fake loan application documents and then after the banks relied upon the documentation and turned over the loan money, the conspirators would share the wealth. It’s reported that the mortgages totaled over $100,000,000 and that the conspirators pocketed around $15,000,000.00 of the loan proceeds.
This was allegedly done in a similar straw buyer operation as the one listed above here in Dallas: in these prosecutions, there is alleged advertising for “real estate investors” in both print and website advertising, inciting people to become what the federal authorities call “straw buyers” through a chance to buy a home with no money down and the comfort of having their mortgage payments covered by the rental income from the homes which the conspirators would rent and manage for them.
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