A Las Vegas woman who was the mastermind of a mortgage fraud scheme that generated almost $15 million in illegal kickbacks was sentenced in San Diego Monday to more than eight years in prison.
Mary Armstrong, 52, pleaded guilty to working with co-conspirators, including a Ramona real estate agent, to recruit real-estate "investors" through ads in the Los Angeles Times, Monster.com, and elsewhere, offering them an opportunity to buy homes using their good credit with no money down.
In order to get these people to participate in the loan fraud, Armstrong promised to make mortgage payments on their behalf using rental income from the properties, according to prosecutors.
In reality, these so-called investors were mere straw buyers who were promised $10,000 for each property purchased. Armstrong, who was not a licensed mortgage broker, secured the deals by falsifying loan applications for them.
Among other things, the loan applications falsely claimed exorbitant income from fake employers and used sham companies that Armstrong's then- boyfriend, 57-year-old William Fountain of Los Angeles, helped to create to verify the borrowers' fabricated employment and rental histories, according the U.S. Attorney's Office in San Diego.
Armstrong and her co-conspirators used the loan applications to obtain mortgages with 100 percent financing and thus avoided having to make any down payments on the properties.
Armstrong earned millions of dollars in profits by convincing the sellers of the properties to inflate the purchase prices by $100,000 or more per property. The inflated amounts were allegedly for construction to improve the properties, when in fact no construction work was performed and the funds were diverted to bank accounts controlled by Armstrong's co-conspirators.
Armstrong then had Fountain and other accomplices launder the funds back to her in cash payments or official checks, so that the money could not be traced. In this way, she pocketed nearly $15 million in kickbacks, made few if any mortgage payments and allowed nearly all of the properties to swiftly fall into foreclosure.
Armstrong arranged the purchase of about $100 million in loans through the scheme, resulting in estimated losses between $7 million and $20 million to the mortgage lenders and secondary purchasers Fannie Mae and Freddie Mac.
Armstrong, who received a 100-month prison term, and Fountain were charged with participating in the scheme along with four others: John Allen, 44, a mortgage-loan processor from Laguna Hills; Justin Mensen, 32, a straw buyer who later recruited others and helped launder the funds; Teresa Rose, 58, a Ramona real estate agent; and Audrey Yeboah, 55, a Los Angeles-based tax preparer who generated fake paperwork to support the loans.
All the defendants have pleaded guilty to participating in the scheme.
Fountain was sentenced Friday to serve 42 months in prison. Additionally, both he and Armstrong were ordered to pay more than $500,000 in restitution to victims of the crimes.
On Sept. 16, Allen was ordered to serve a year in custody. Mensen, Rose and Yeboah are scheduled to be sentenced in December.
-City News Service