Friday, October 31, 2008

17 indicted in upscale mortgage fraud case - - 31 Oct 2008

A federal grand jury on Wednesday indicted 17 people in an alleged $12.6 million mortgage-fraud scheme that targeted upscale neighborhoods in Raymore and Lee’s Summit.

The scheme purportedly paid $2.3 million in kickbacks to home buyers through shell companies the defendants established. The real estate agent and the builder also allegedly profited from the scheme, authorities said. The big losers were the mortgage companies that provided the loans and the neighboring property owners.

“This is one of the largest mortgage-fraud cases ever prosecuted in our district and illustrates that this is a problem that affects not only low-income neighborhoods, but also more affluent suburbs,” said U.S. Attorney John Wood.

The indictments are the latest in a series of mortgage-fraud prosecutions aimed at restoring the integrity of the Kansas City housing market, Wood said. The case also reflects a sour national housing picture that has dealt a body blow to the U.S. financial system.

“Combating significant fraud in this area is a priority because mortgage lending and the housing market have a significant overall effect on the nation’s economy,” said FBI Assistant Special Agent in Charge Daniel D. Jones.

Although the indictment did not identify a ringleader, real estate agent Angela R. Clark, 40, figures prominently in the case, as do former mortgage loan officers Cynthia D. Jordan, 41, and Stefan M. Guerra, 30. All are from Lee’s Summit.

Prosecutors alleged that Clark, Jordan and Guerra conspired with 14 property buyers from Missouri, Kansas, Nebraska and California to defraud mortgage lenders from June 2005 to May 2007.

The buyers purportedly obtained loans by providing false information to lenders and then bought 25 homes at inflated prices in the Raintree and Belmont Farms subdivisions in Lee’s Summit and the Eagle Glen subdivision in Raymore.

Clark and Jerome Shade Howard, 39, of Anaheim, Calif., purportedly sought potential buyers. Howard also supplied false Social Security numbers that some buyers used to obtain loans, the indictment alleged.

Raymore builder Jerry Emerick, who did business as Ty Construction and Residential Contracting LLC, allegedly paid kickbacks to the purchasers, but he was not charged Wednesday.

Wood said Emerick would be charged later.

The homeowners received kickbacks of $60,000 to $125,000 on each house, the indictments alleged.

According to the indictment, Clark received $381,495 in real estate fees while the mortgage lenders also received commissions.

Wood said he could not comment specifically on how the scheme distorted home values in the affected subdivisions. However, a look at Jackson County property tax records suggests it was substantial.

According to the indictment, defendants secured a $603,000 mortgage in July 2006 for the purchase of a home in Belmont Farms at 509 Southeast Snaffle Bit Court. After subtracting his building costs and profits from the mortgage payout, Emerick allegedly paid a $114,000 kickback to a shell company controlled by Howard, the purchaser, and $30,000 in real estate fees.

But while the home’s 2008 market value is listed at $625,000, according to county tax records, it sold in August for $290,000.

Another nearby home identified in the indictment — 520 Southeast Snaffle Bit Court — had the same issue. Its 2008 market value is listed on county records at $520,000, but it sold in February for $248,000.

Although the scheme may have artificially inflated area property values at first, Wood noted that many of the 25 houses now are vacant and in foreclosure, thus depressing values.


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