Steven Garcia, 45, Schaumburg, Illinois and his brother, Michael R. Garcia, 43, Streamwood, Illinois, two suburban mortgage brokers, have been charged with fraudulently operating a purportedly independent appraisal management company to control property valuations, and brokering fraudulent loans to finance real estate transactions between themselves and nominees.
The brothers operated American Financial Mortgage Services Inc., a licensed mortgage brokerage in Schaumburg, Illinois. According to a criminal information filed Wednesday in federal court in Chicago, the brothers fraudulently caused lenders to make mortgage loans brokered by American Financial by falsely representing that the supporting property appraisals were performed by independent appraisers, when, in fact, the Garcias and American Financial employees selected the appraisers, managed the appraisal process, influenced property valuation and paid the appraisers.
According to the charges, the Garcias bypassed FHA regulations by controlling a purportedly independent appraisal firm, Residential Appraisal Management Company Inc., through a nominee. The Garcias fraudulently used RAMCI to steer appraisals to hand-picked appraisers, including a relative of the Garcias, who would provide an appraised value sufficient to support a proposed loan, while falsely representing to lenders that RAMCI selected appraisers based on experience and skill, the information states.
The Garcias also fraudulently caused lenders to make mortgage loans to finance fraudulent real estate transactions in which the Garcias and their nominees purchased and re-sold residences at inflated prices to unqualified nominees who then defaulted on the loans, the information states. The Garcias furnished lenders with false employment and income information to support the nominees’ loan applications, and then provided the nominees with the money to make the purchases, the information states. The Garcias fraudulently obtained approximately $1.9 million that was disbursed at the closings of the fraudulent real estate transactions, and another $274,000 in commissions from those deals, the information states.
Each are charged with one count of mail fraud and one count of wire fraud. Arraignments in federal court in Chicago have not yet been scheduled.
Each count in the information is punishable by up to 30 years in prison. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory U.S. Sentencing Guidelines.
The government is represented by Assistant U.S. Attorneys Brian Netols and Matthew Ebert.
The charges were announced by John R. Lausch, Jr., United States Attorney for the Northern District of Illinois; Brad Geary, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development’s Office of Inspector General in Chicago; and Jeffrey S. Sallet, Special Agent-in-Charge of the Chicago office of the Federal Bureau of Investigation.
Federal Housing Administration regulations prohibit mortgage brokers from having substantive communications with appraisers relating to valuation of properties, including ordering or managing an appraisal assignment, and from paying appraisers. Lenders rely on independent appraisals conducted within FHA regulations.
The public is reminded that an information is not evidence of guilt. The defendants are presumed innocent and entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.