To the tune of a MasterCard commercial:
$4.7 million in fradulent mortgage loans…
$944,224 lost by lenders….
$1.2 million lost in equity to homeowners….
Mary Ann Dean and Charles Donaldson pleaded guilty to the charge of conspiracy to commit wire fraud in connection with a mortgage fraud scheme of Sunset Mortgage Company.
Dean was a loan originator and operator of the Maryland-licensed mortgage brokerage franchise while Donaldson acted as a loan originator during part of the conspiracy. Donaldson would steer clients to Dean’s brokerage franchise and facilitated communication between Dean and buyers and sellers.
Beginning in 2005, Donaldson identified homeowners who were in financial distress because they were unable to make the mortgage loan payments on their homes and enticed the homeowners to participate in a foreclosure “rescue” plan. Donaldson told the homeowners that he would locate “investors” to purchase the homeowners’ properties; that the homeowners would rent their properties after selling them to the “investors,” who would receive a small percentage of the homeowners’ equity; that the remainder of the homeowners’ equity would be transferred to Donaldson, who would hold it in escrow; and that the homeowners would buy back their properties after twelve to eighteen months, during which they could rehabilitate their finances and “repair” their credit while they continued to live in their homes.
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Donaldson then recruited associates and family members as “investors” to purchase the properties. He then paid them all a small percentage of the seller’s equity at settlement. Homeowners were then expected to pay monthly rent to the “investor” to remain in their home and in return the “investor” was expected to make and keep up with the mortgage payments.
Prior to the sales of the properties, Donaldson created and recorded Second Deeds of Trust or promissory notes that purported to show debts owed by the homeowners to Donaldson, and which were secured by the existing equity in their home. At the closing of the sale of the property to the “investors,” the title companies disbursed funds to Donaldson’s bank account in order to payoff the liens he had established. Donaldson assured the homeowners and “investors” that he would assist them, if need be, with their rent and mortgage payments respectively, using that equity, which he claimed he was holding in his “escrow account.”
In reality all Donaldson simply put the funds into his own personal checking account, using the for business and personal purposes. Dean knew of this practice the whole time.
Donaldson and Dean obtained the new mortgage loans on the properties in the names of the “investors” with higher monthly mortgage payments, and, most times, higher interest rates, than that which the homeowners were currently paying. To obtain the new loans, Dean made false representations in the loan applications, including, that the “investors” intended to live in the properties as primary residents and inflating the incomes of the “investors.” Donaldson also assisted Dean by procuring false verification of employment letters. Dean, who acted as the mortgage broker, submitted the false loan applications to lenders to obtain financing for the purchases of the properties in the names of the “investors.” In some instances, Dean submitted fraudulent loan applications for the same “investor” to purchase multiple properties as their ‘primary residence’ in a short period of time.
Given the fraudulent loans at a high interest rate and large transaction fees and premiums Donaldson and Dean knew the clients that had trusted them to help them keep their homes had lost control and could not afford the new loan payments since they were now higher than what they were higher than what they were originally paying. They also did not quality for a refinance.
Due to the nature of the high payments “investors” and homeowners were forced to use personal savings and credit cards to keep up with mortgage and rent payments, respectively, until their funds had run dry. The loans went into default and as of right now thirteen of the homes have been foreclosed upon and proceedings for foreclosure have started for three of the other homes.
Lenders made over $4.7 million in mortgage loans based on the fraudulent loan applications, and have so far lost at least $944,223.91. Dean and Donaldson’s scheme also caused the homeowners to lose between $1.2 million and $1.4 million. More than 20 victims were defrauded by Donaldson and Dean.
Inspector General Jon T. Rymer of the Federal Deposit Insurance Corporation (FDIC) said, “I am once again pleased to join our law enforcement colleagues in defending the integrity of the financial services industry by combating mortgage fraud. We are particularly concerned in cases like this one where professionals have misused their positions of trust and whose fraudulent activities in committing mortgage fraud have harmed numerous innocent homeowners. We are committed to continuing our investigations of such criminal misconduct to help maintain the safety and soundness of the nation’s financial and lending markets” – Source.
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