New York Makes Arrests In Mortgage Fraud Ring

Subprime lending not the only contributor to housing collapse

October 9, 2009

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Targeting corruption in the lending industry, the state of New York and the U.S. Attorney's Office for the Southern District of New York have teamed up to take down what they call a mortgage fraud ring.

New York Attorney General Andrew Cuomo said the 12 defendants, including lawyers, loan officers, and providers of false identification, illegally obtained $9 million in loans for phantom homebuyers.

As alleged in the indictment: Between 2005 and 2007, the defendants engaged in an illegal scheme to trick various mortgage lending institutions into giving loans for the purchase of homes in New York City and Long Island. In many instances, the defendants used fake identity information - like driver's licenses and bank statements - and presented imposters at home closings who claimed to be those identities.

Through the scheme, the defendants obtained dozens of home mortgage loans with a face value of approximately $9 million. Some loans were in the names of individuals who did not exist and others were in the names of individuals whose identification information had been misused. Most of these loans are now in default.

"This is exactly the type of criminal activity that was caused by - and contributed to - the terrible mortgage crisis facing our nation," said Cuomo. "These defendants were allegedly able to obtain millions of dollars in home loans for phantom buyers precisely because obtaining these loans was far too easy at the time. As we work to reform our nation's mortgage regulation, law enforcement must continue to collaborate to ensure that those who exploited the system for their personal financial gain are brought to justice."

"The U.S. economy is still reeling from the damage done by mortgage fraud schemes like the one unraveled today," said Preet Bharara, the United States Attorney for the Southern District of New York. "These charges expose the corrupt conduct of industry insiders who allegedly manipulated the mortgage markets to fraudulently obtain millions in loans. What is especially disturbing is that two of the alleged fraudsters were attorneys who used their law degrees to cheat the system and line their pockets. We will continue to prosecute corrupt custodians of the mortgage markets to the full extent of the law because our financial system depends on it."

The twelve defendants include settlement attorneys, attorneys involved in mortgage loan closings, loan officers, loan processors, as well as individuals who produced false identification documents, secured the fake buyers, and those who pretended to be the fraudulent identities at the closings. All defendants are charged with Conspiracy to Commit Bank Fraud and Wire Fraud, which carries a maximum sentence of 30 years' imprisonment.

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