As the housing market continues to decline, it seems that the number of mortgage fraud indictments continue to rise. Yet another was handed down recently as a nine-count indictment charging four Houston, Texas area residents with a multi-million dollar mortgage fraud scheme was unsealed.
According to the FBI, Carlos Paul Gonzalez and Ken Russell Browder, who together operated several Houston area businesses including Advantage C&R Funding Group and First Advantage Funding Group, and Jannice Bonner and Machell Halstead, two Escrow officers involved in the closing of residential real estate transactions at various Houston area title companies, are accused of conspiracy to commit wire and mail fraud and multiple substantive counts of wire fraud.
Involving the purchase of multiple residential properties in the Houston Texas area, the indictment alleges that those indicted mislead mortgage lenders regarding the borrower’s ability and incentive to repay mortgage loans. Not only were the borrower’s not inclined to repay, but in many cases the documentation for loan qualification was false.
According to the indictment, Carlos Paul Gonzalez and Ken Russell Browder worked at a Houston branch of a Mortgage Broker’s Office. Jannice Bonner and Machell Halstead worked at various title companies in Houston as Escrow Officers closing residential transactions. Gonzalez and Browder are accused of recruiting individuals to act as borrowers and apply for mortgage loans to purchase these properties. Operating under various business names, the indictment alleges Gonzalez and Browder arranged for the purchase of the properties and would then receive proceeds from the fraudulently-induced loans into bank accounts held in the names of these businesses from the closing transactions held at the title companies. Bonner and Halstead are accused of preparing and disseminating closing documents used to close these real estate transactions and fund the loans and then disbursing the loan proceeds through the Escrow Accounts of the title companies.
While those indicted under law are presumed innocent until convicted, the increase in mortgage fraud activity over the past 18 months has been astounding. More and more we are finding law enforcement uncover schemes that clearly indicate a serious lack of control in the mortgage arena. The use of straw buyers, artificially inflated appraisals and fraudulent documentation undermines the credibility of the industry to manage itself.
As a white collar crime speaker and writer, I see the dramatic increase in mortgage fraud only increasing over the coming months as weakness in the lending sector and the decline in the real estate market uncover frauds that other wise may have been camouflaged for years.