A Ramona real estate agent, an unlicensed mortgage loan broker and her assistant were charged in a federal indictment unsealed today with devising and executing a mortgage loan origination fraud and kickback scheme.
Loan broker Mary Armstrong, real estate agent Teresa Rose and Armstrong's assistant, William Fountain, were charged with conspiracy to commit wire fraud and to launder money. Armstrong also was charged with wire fraud and money laundering.
A fourth defendant, 31-year-old Justin Mensen, pleaded guilty in April to participating in the alleged conspiracy.
According to the May 10 indictment, the defendants carried out their scheme by recruiting "investors" through newspaper and online advertisements and encouraging them to buy homes in Ramona and elsewhere.
The advertisements offered investors who had good credit the chance to buy property with no money down, and the defendants falsely claimed they would make the mortgage payments on the investor's behalf using rental income they generated by renting and managing the properties, according to the indictment.
In reality, the so-called investors were nothing more than straw buyers who were promised $10,000 for each property purchased as part of the scheme, the indictment stated.
Prosecutors allege the defendants were able to secure mortgages for the properties by falsifying loan applications for the straw buyers.
Among other things, the loan applications falsely claimed exorbitant income from fake employers and used sham companies to verify the borrowers' fabricated employment and rental histories, according to the indictment.
The defendants used the loan applications to obtain mortgages with 100 percent financing, thus avoiding having to make any down payments, the indictment stated.
Prosecutors contend the bulk of the profits the defendants made from the scheme resulted from their convincing sellers to inflate the purchase price of the properties by approximately $100,000, which was allegedly to be used for construction to improve the properties.
In fact, no construction work was ever performed and the funds were diverted to bank accounts controlled by the defendants, according to the indictment.
The defendants pocketed the money, made few if any mortgage payments, and allowed nearly all of the properties to fall into foreclosure, the indictment stated.
Rose, Armstrong and Fountain purchased at least 16 properties in Ramona, El Cajon and Washington state as part of the scheme, prosecutors allege.
They secured more than $11 million in mortgage loans, skimmed more than $1.5 million in sham construction kickbacks and raked in hundreds of thousands of dollars in additional proceeds through commissions and fees listed as part of the closing costs for each transaction, according to the indictment.
As a result of the foreclosures and defaults caused by the defendants' failure to make the mortgage payments they promised, the defrauded mortgage lenders suffered losses of approximately $5 million, the indictment stated.
Rose, 57, pleaded guilty May 30 to participating in the conspiracy, admitting that she represented both the buyers and the sellers in each Ramona sale and arranged for inflated sales prices of the Ramona properties.
Fountain, 56, was arrested May 25 and has pleaded not guilty to the charges. Armstrong, 51, was arrested today in Las Vegas.
–City News Service