Conspirators
Also Obtained Over $4.7 Million in Fraudulent Mortgage Loans
BALTIMORE—U.S. District Judge William D.
Quarles, Jr. sentenced Mary Anne Dean, age 60, of Severna Park, Maryland, today
to 37 months in prison, followed by three years of supervised release, for
conspiracy to commit wire fraud in connection with a mortgage fraud scheme
which resulted in over $4.7 million in fraudulent mortgage loans, of which the
lenders ultimately lost at least $944,223.91, and which caused the homeowners
to lose over $1.2 million in equity in their homes. Judge Quarles also ordered
Dean to pay restitution, with the exact amount to be decided at a later date.
The sentence was announced by United
States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent
in Charge Richard A. McFeely of the Federal Bureau of Investigation; and
Inspector General Jon T. Rymer of the Federal Deposit Insurance Corporation.
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.”
According to her plea agreement, Dean
was a loan originator and operated Sunset Mortgage Company, a Maryland-licensed
mortgage brokerage franchise, from her home. Co-defendant Charles Donaldson,
age 58, of Bowie, Maryland, who was also a loan originator during part of the
conspiracy, steered clients to Dean’s brokerage franchise and facilitated the
communication between Dean and the buyers and sellers that he had recruited.
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 12 to 18
months, during which they could rehabilitate their finances and “repair” their
credit while they continued to live in their homes.
Donaldson recruited family members and
associates as “investors” to purchase the properties and paid them a small
percentage of the seller’s equity at the time of settlement. As part of the
scheme, the homeowners were expected to pay monthly rent to the “investor” to
remain in their home and the “investor” was to make 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 fact, Dean and Donaldson knew that Donaldson was simply putting
these funds into his personal checking account, and using them for personal and
business purposes, including the purchase of a personal residence with a
cashiers check in the amount of $169,132.60.
Dean and Donaldson 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.
Based on the materially false loan
applications, lenders funded loans at high interest rates for the “investors,”
yielding large transactional fees and premiums for Dean. Donaldson and Dean, as
the licensed loan originator and mortgage broker respectively, knew that as a
result of these sales, the seller who sold his or her home to the “investor”
had lost control of their home; could not afford the new mortgage loan with
higher payments and interest than they were originally paying; and could not
qualify for a refinance.
Faced with the higher mortgage interest
rates and payments, the “investors” and homeowners were forced to use their
personal savings and credit card accounts to make mortgage and rent payments,
respectively, until they were no longer able to do so. Despite his previous
assurances, Donaldson only used a small amount of the equity from the sale of
the homes to assist with the payments and the loans went into default. Thirteen
of the homes have been foreclosed upon and foreclosure proceedings against
three other homes are ongoing.
As a result of the scheme, 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.
Donaldson pleaded guilty to his
participation in the scheme and was sentenced to 41 months in prison on March
8, 2012.
The Maryland Mortgage Fraud Task Force
was established to unify the agencies that regulate and investigate mortgage
fraud and promote the early detection, identification, prevention, and
prosecution of mortgage fraud schemes. This case, as well as other cases
brought by members of the task force, demonstrates the commitment of law
enforcement agencies to protect consumers from fraud and promote the integrity
of the credit markets. Information about mortgage fraud prosecutions is
available www.justice.gov/usao/md/Mortgage-Fraud/index.html.
This law enforcement action is part of
President Barack Obama’s Financial Fraud Enforcement Task Force. President
Obama established the interagency Financial Fraud Enforcement Task Force to
wage an aggressive, coordinated, and proactive effort to investigate and
prosecute financial crimes. The task force includes representatives from a
broad range of federal agencies, regulatory authorities, inspectors general,
and state and local law enforcement who, working together, bring to bear a
powerful array of criminal and civil enforcement resources. The task force is
working to improve efforts across the federal executive branch, and with state
and local partners, to investigate and prosecute significant financial crimes,
ensure just and effective punishment for those who perpetrate financial crimes,
combat discrimination in the lending and financial markets, and recover
proceeds for victims of financial crimes.
United States Attorney Rod J. Rosenstein
praised the FBI and FDIC Office of Inspector General for their work in this
investigation and thanked Assistant U.S. Attorneys Mark W. Crooks and Jefferson
M. Gray, who are prosecuting the case.
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