A former New Jersey real estate investor pleaded guilty Monday to charges that he conspired with others to commit mortgage fraud, officials said.
Barry Fauntleroy, 39, admitted to causing the U.S. Department of Housing and Urban Development to insure mortgage loans for unqualified home buyers, enabling Fauntleroy and co-defendants to earn huge profits on the sale of run-down properties financed with fraudulent loans, according to U.S. Attorney Christopher J. Christie.
Fauntleroy, currently of Atlanta, entered a guilty plea in U.S. District Court in Newark. Sentencing is scheduled for Jan. 23, 2006.
Fauntleroy was president of EON Institute, a real estate holding company in New Jersey. On June 2, 2005, a federal indictment was returned alleging that from at least June 1999, through July 2001, Fauntleroy conspired with Devon Bowie, 53, of Malverne, N.Y., and others to prepare falsified loan applications and supporting documents that were submitted to the Federal Housing Administration. The documents related to loans insured by the HUD.
Bowie was the president of Neighborhood Mortgage Bankers Co., which maintained an office in Elmsford, N.Y.
Neighborhood Mortgage was in the business of making mortgage loans for residential properties, and was authorized by HUD to make mortgage loans, subject to HUD regulations, that were insured under the HUD program.
At his plea hearing, Fauntleroy admitted that he, along with his co-conspirators, fraudulently induced HUD to insure certain mortgage loans made by Neighborhood Mortgage to unqualified borrowers.
Fauntleroy in pleading guilty acknowledged that as part of their scheme, he and others solicited and recruited individuals with relatively low income to buy homes in Essex County and elsewhere with the promise that the borrowers could buy homes with little or no money down.
According to the indictment, Fauntleroy and others then located dilapidated properties in Essex and elsewhere that were available for sale. The co-conspirators then showed the borrowers the properties, represented to the borrowers that they owned the properties, that they would significantly renovate them and sell the properties to the borrowers at an agreed upon price, which represented the fair market value of the properties in the significantly improved condition.
Fauntleroy admitted that he and others then arranged for the borrowers to purchase the properties by assisting the borrowers in obtaining HUD-insured loans through Neighborhood Mortgage in the amount of the contract price.
Fauntleroy admitted that, in support of the HUD loan applications, his co-conspirators created and submitted false and fictitious bank statements, leases, IRS Forms W-2, verifications of past mortgage payments, pay stubs, attorney escrow letters, gift letters, verification of employment, real property appraisals and deposit checks.
According to the indictment, Fauntleroy and others then purchased the properties at a reduced price, at times using the proceeds from HUD-insured loans obtained by the borrower, and re-sold the properties to the borrowers at the market, or contract, price, having done little or no work to renovate or otherwise improve the properties.
Fauntleroy faces up to five years in prison and a $250,000 fine.
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