Eight people have been sentenced to serve a total of 26 years in prison — or an average of three years, three months each — for their roles in an Indianapolis, Ind.-area mortgage fraud scheme that prosecutors said involved at least 136 fraudulent loans totaling $16.6 million.
Of those loans, 39 mortgages totaling more than $7 million were used to purchase properties from individual sellers — usually individuals who either did not have their homes listed to sell or who listed them as "for sale by owner," prosecutors said.
The remaining 97 fraudulent loans, totaling $9.3 million, were used to purchase duplexes in the Windsor Village neighborhood on the east side of Indianapolis.
The scheme involved purchasing properties at fair market value, usually by means of an option agreement or unrecorded land contract, and reselling them at much higher prices to straw buyers who used their good names and credit to obtain loans but contributed none of their own money to the deals.
False loan applications, false documents, inflated appraisals and fraudulent loan packages were used to obtain approvals from lenders between November 2003 and August 2005, prosecutors said.
Argent Mortgage Co., The MoneyStation and People’s Choice Mortgage — a warehouse lender in Kentucky who had a correspondent lending agreement with Countrywide Home Loans — funded the loans. Countrywide Home Loans purchased all of the loans used to purchase the Windsor Village duplexes shortly after they were funded, prosecutors said.
All of the loans involved in the schemes went into default, with lenders either foreclosing on the homes or taking other action, including granting deeds in lieu of foreclosure or allowing short sales of the properties.
The alleged ringleader of the scheme, Robert Andrew Penn, 44, was sentenced to seven years in prison on Jan. 4 and ordered to pay $11.41 million in restitution, after entering guilty pleas to charges of wire fraud, conspiracy to commit wire fraud, and money laundering (see press release).
Penn and his associates allegedly owned and operated numerous business entities that were used to illegally obtain loans, prosecutors said. Penn allegedly controlled and directed the activities of the others involved.
Sentenced with Penn were Tamara E. Scott, 50, who received a two-year sentence for conspiracy to commit wire fraud and money laundering, and Stephen Scott Brown, 37, of Indianapolis, who was sentenced to three years, one month in prison for conspiracy to commit wire fraud and money laundering. Scott was ordered to pay $11.12 million in restitution, and Brown $2.79 million.
Prosecutors said Scott was married to Penn during the commission of all of the mortgage fraud crimes, and was involved in the business activities of most of the entities used to purchase, sell and manage properties in the fraudulent transactions, prosecutors said. …CONTINUED
Brown was involved in the mortgage brokerage business and assisted in brokering many of the loans with Argent Mortgage Co. and The MoneyStation, prosecutors said.
Brown filled out false loan applications, obtained false documents, obtained inflated appraisals, and submitted fraudulent loan packages to lenders, receiving $1,500 to $2,000 for each fraudulent loan he brokered, prosecutors said. He also assisted in funding some of the fraudulent downpayments.
Other sentences in the case include:
- Kevin Lafavers, 46, formerly of Indianapolis, was sentenced Tuesday to two years and nine months in federal prison after pleading guilty to conspiracy to commit wire fraud and wire fraud, and ordered to pay $1.47 million in restitution.
- Donald T. Brown, 67, of Lebanon, Ind., was sentenced to two years, three months after pleading guilty to conspiracy to commit wire fraud and money laundering, and ordered to pay $9.98 million in restitution.
- Mark Roth, 55, of Indianapolis, was sentenced on Jan. 11 to three years, seven months in prison after pleading guilty to one count of wire fraud and one count of money laundering, and ordered to pay $1.46 million in restitution.
Also receiving prison sentences were Timothy A. Brown, of Indianapolis, who was sentenced to three years, one month in prison, and Jerry J. Jaquess, of Carmel, Ind., who was sentenced to two years, six months.
Most of the defendants in the case were charged in April 2009 — more than five years after the first fraudulent loans were obtained.
Mortgage fraud cases often don’t come to light until loans obtained through misrepresentations go into default.
Reports of suspected cases of mortgage fraud showed double-digit growth for six years before leveling off in the first half of 2009, according to the most recent report from the Financial Crimes Enforcement Network, (FinCEN). Suspected cases of mortgage fraud remain at historically high levels (see story).
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