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Rachel Dollar, the editor of Mortgage Fraud Blog, is an attorney and Certified Mortgage Banker who handles litigation for lending institutions and secondary market investors. She is an author and a nationally recognized speaker on the topic of mortgage fraud. Ms. Dollar is a shareholder with the law firm of Smith Dollar, PC, is licensed to practice law in California and maintains offices in Santa Rosa, California. Email Ms. Dollar
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5 Indicted in Multimillion Dollar Texas Fraud Scheme
A licensed Texas attorney and real estate developer, a sports agent, two bank loan officers, and a real estate appraiser have been indicted in a multimillion dollar mortgage fraud scheme. The indictment alleges involvement in a mortgage fraud scheme that reached every aspect of a real estate loan: seller, buyer/borrower, loan officer, appraiser, escrow officer, and title company.
The Defendants are:
Jay Westrick, licensed appraiser, Houston, Texas;
Jerome Karam, 44, real estate developer and licensed Texas lawyer, Friendswood, Texas;
Dwight Sean Jones, 44, former NFL player and sports agent, Beverly Hills, California;
Tommy Jay Trammel, 44, loan officer, Houston, Texas; and
David Ranostaj, 40, loan officer, Houston, Texas.
Trammel and Ranostaj are former loan officers with Southwest Bank of Texas, Bank of Houston and Whitney National Bank. All five defendants surrendered at the offices of the Federal Bureau of Investigation in Houston, Texas and are expected to appear in federal court for arraignment and bond consideration.
“Mortgage fraud affects our communities and financial markets, victimizing lenders, homeowners, and others,” said United States Attorney DeGabrielle. ”My office has dedicated significant resources to work with our law enforcement partners to detect and prevent mortgage fraud and to prosecute and hold accountable those responsible.”
The indictment charges the defendants with 12 counts of bank fraud in connection with loans funded by three different banks between 1999 and 2001. The scheme was the same at each bank, according to the indictment – collusion between the seller, buyer/borrower, and lender to lend more money than the property was worth, and thereby reap personal profit. Most properties were appraised by the same appraiser and all closed at the same title company. The indictment alleges that the loans transactions took place between September 1, 1999 and April 5, 2001, involving Southwest Bank of Texas, Bank of Houston, and Whitney National Bank. The value of all the loans made by the Defendants, pursuant to this alleged scheme, totaled more than $42 million.
According to the indictment, Karam was an attorney and real estate developer who specialized in converting apartments to condominiums. His alleged frequent co-investor was Jones, a former NFL football player who played with the Los Angeles Raiders, Houston Oilers and Green Bay Packers from 1984 to 1996, and who now works as a licensed sports agent for professional athletes. Allegedly, Jones both invested in many of Karam’s projects, and recruited additional investors from among his professional football player clients.
Karam and Jones allegedly induced the loans based on false representations as to the value of the property and the distribution of the loan funds. They did so, according to the charges, with the assistance of two former bank loan officers, Trammell and Ranostaj. The two men are accused of facilitating loans to unqualified lenders, and for amounts in excess of the properties’ values, in exchange for loan proceeds diverted to themselves at the closings. They kept their allegedly unlawful conduct a secret from their employers, who were the ultimate lenders.
In order to divert money from closings, Karam, Jones, Trammell and Ranostaj allegedly created shell corporations, using names that would disguise their true ownership. For example, the indictment alleges Karam created a company called Jet Landscaping, which never actually did any business. But at closings where investors or individuals bought condominium units from Karam, he would supposedly include a line-item in the HUD-1 closing statement for substantial fees owed to Jet Landscaping. That money would simply go into Karam’s hands, according to the indictment. The line-item disbursements were hidden from the lenders.
Westrick, a licensed appraiser, is alleged to have prepared false and inflated real estate appraisals to further the scheme. Westrick allegedly wrote appraisals in amounts dictated by Karam, without regard to independent analysis or the standards of conduct for licensed real estate appraisers.
Specifically, Karam allegedly directed that the signature page of the lender approved closing statement/HUD-1 be attached to a closing statement/HUD-1 with a different distribution of the seller’s funds. Thus, according to the indictment, the lenders were left to rely on the prior, fraudulently certified, closing statements/HUD-1s in deciding whether to fund the loans and in reviewing their loan portfolio.
In 2002 Whitney Bank filed a civil complaint alleging appraiser malpractice against Jay Westrick, Charles A. Brown, Westrick & Associates and O’Connor & Associates. Chicago Title Company was named as a defendant in a third party complaint filed by O’Connor & Associates. The case settled prior to trial.
Each of the 12 counts of bank fraud carries, upon conviction, a possible sentence of up to 30 years imprisonment, and a possible fine of up to $1 million
“Mortgage fraud continues to be a major crime problem here in the Houston area,” said Interim Special Agent in Charge Alex J. Turner of the FBI Houston division. “Mortgage fraud affects everyone and we have seen communities in distress due to excessive foreclosures that impact all of us through lower home values and increased property taxes. The FBI continues to be proactive in combating mortgage fraud through several investigative initiatives to include the Houston Area Mortgage Fraud Task Force. We ask that the public contact us at 713-693-5000 whenever they have any information relating to mortgage fraud.”
IF THE FBI IS SO PROACTIVE IN HOUSTON, WHY DONT WE SEE MORE FRAUD NEWS IN THIS BLOG? I THINK YOU MEAN O’CONNOR & ASSOCIATES.I DONT KNOW WHO THEY TALK TO AT HARRIS COUNTY APPRAISAL DISTRICT BUT A REDUCTION OF 4.5 MILLION IN TAX VALUES WAS GIVEN TO A SO CALLED INVESTOR IN 2003.JULY 9 1994 HOUSTON CHRONICAL HAS A REPORT ABOUT CORRUPTION IN HCAD.OUR HOMES ARE ROTTING BECAUSE OF A PERSON WHO SHOULD BE DEPORTED IN MY OPION.MILLIONS OF DOLLARS GONE DOWN THE DRAIN.
Posted by on 06/18 at 03:35 AM
Interesting. I’ve tried to report what looks like a similar scam in Central Texas and the FBI doesn’t seem to have time to take down the details. Looks like a multi-million dollar fraud scheme that is working like a charm here.
Posted by on 06/20 at 03:37 AM
I am a litigator. I cuurently represent an agent (POA) for a foreign principal who sold a Maryland residential property. All my client did was sign the contract of sale; another POA represented the seller at closing. Buyer and seller were each represented at settlement by well known brokers, and settlement was conducted by a settlement attorney.
The buyer offered $640K for the property listed for $600K, but she required an addendum that gave her $45K in credits to be applied at settlement. At the settlement, the buyer apparently under direction from the loan broker agreed to a HUD-1 which did not reflect the $45K in credits. If the buyer wished, she could have received the $45K at settlement; as it was, the buyer received more than $45K in sales proceeds less all costs. The loan amounts to the borrower (from first and second mortgages) totaled approximately $639,295 (this is 99.9% of the “purchase price, $640,000” but 107.5% of the net price considering credits $595,000 her credits.
After the settlement, the foreign principal refused to give the buyer $45K in cash. The buyer sued the foreign principal and my client, one of the US POA’s. However, she was unable to serve the foreign principal, and thus far the court has refused to dismiss the claim against my client dispite my argument that he was an agent for a disclosed principal and thus not liable for any breach.
This smells like appraisal frqaud to me with the loan broker trying to keep the crdits under the table so that it would not be reflected on the HUD-1.
Do you know of other examples of such conduct. Is HUD concerned about it?
Failed Mortgage Firm Trustee Allowed $50,000 in Fees Union Leader
U.S. Bankruptcy Court Judge J. Michael Deasy will approve $50,000 in legal fees for the trustee of failed mortgage brokerage businesses Financial Resources Mortgage Inc. and CL&M Inc.
Bend Oregon Event to Help Homeowners Prevent Foreclosures Oregon.Gov
As part of an ongoing effort to help homeowners avoid foreclosure, state agencies are organizing a foreclosure-prevention event in Bend on Saturday, March 27, 2010.
Shelbyville Man Gets 2-Year Sentence For Loan Fraud Chattanoogan.Com
Prosecutor Gary Humble said the lost was approximately $2.3 million in the mortgage fraud involving hundreds of homes in the Shelbyville area.
Lend America, VP Ashley Banned from FHA Housing Wire
Michael Ashley, the embattled former vice president of Federal Housing Administration (FHA)-backed mortgage originator Lend America, and the company he worked for, were permanently banned from doing business in the industry last week.
Countrywide Tries to Pin Blame on Insurer Court House News
Countrywide Home Loans demands $111 million from Triad Guaranty Insurance, claiming Triad is trying to blame mortgage lenders for the insurer's role in the housing bubble and collapse.
Investors Say They Were Swindled in Property Scheme Fox 13 Now
Utah Division of Consumer Protection is joining forces with a few investors who claim they have been cheated by an agency called "Utah Mini Ranches.
Greenfield Man Accused of Housing Scam The Republic
A former real estate agent conned at least eight people by renting them properties actually owned by a federal agency and then running off with their deposits, prosecutors said.
Appraisal Institute Opposes Obama Administration's Plan for Homeowner 'Short Sales' PR News Wire
Citing concerns about increased mortgage fraud, four organizations representing more than 35,000 real estate appraisers today voiced their opposition to changes to an Obama administration program that will encourage "short sales" of homes.
Ownership Rights to Get Another Look TBO.Com
State lawmakers may beef up protections of property owners' rights by rewriting a law this spring that is at the center of a case of alleged fraud in Pasco County.
Thursday, February 18, 2010 F. Jeffrey Miller Trial Continued Testimony
As reported by Anne Mitchell, who viewed the trial:
Angela Parenza worked for Jeff Miller as the office manager for 7 or 8 years beginning in 1998. Parenza was indicted along with Miller and pled guilty to conspiracy to commit bank fraud and money laundering. Parenza testified that Miller or his contractors allegedly preferred to build all the...
Wednesday, February 10, 2010 F. Jeffrey Miller Trial Coverage Continued - Witness Testimony
Steve Middleton Testimony - Coverage Provided by Anne Mitchell
The Government continued in its cross examination of Steve Middleton. He was shown several HUD-1 statements involving sales of homes located in Overland Park, KS, and Olathe, KS. The HUD statements each allegedly showed line items of payments to (James) Moser & Associates, LLC's...
Monday, February 01, 2010 F. Jeffrey Miller Trial Coverage - Continued Witness Examination
According to Anne Mitchell, who is present in court for the trial:
Next Witness: Kelly Sanford
Kelly Sanford of the Federal Reserve was a short witness for the Government. Sanford manages electronic payments between banks and member financial institutions. He was shown copies of wire transfers and asked whether they coincided with the counts in...
Wednesday, January 27, 2010 F. Jeffrey Miller Trial - Prosecution Witnesses Continued
According to Anne Mitchell, who is viewing the trial:
January 13, 2010
Witness: Rick Hayes
Rick Hayes testified that on the day that he closed on his Miller Enterprise home, he received a phone call from the Kansas Banking Commission informing him that his loan was fraudulent. After the Hayes responded to a classified ad, they met with John...
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The information and notices contained on Mortgage Fraud Blog are intended to summarize recent developments in mortgage fraud cases and mortgage banking matters nationwide. The posts on this site are presented as general research and information and are expressly not intended, and should not be regarded, as legal advice. Much of the information on this site concerns allegations made in civil lawsuits and in criminal indictments. All persons are presumed innocent until convicted of a crime. Readers who have particular questions about mortgage banking, mortgage fraud matters or who believe they require legal counsel should seek the advice of an attorney. The creators, editors and sponsors of Mortgage Fraud Blog do not intend to create a confidential relationship or an attorney-client relationship by communication via or arising from this site.
Rachel Dollar, the editor of Mortgage Fraud Blog, is an attorney and Certified Mortgage Banker who handles litigation for lending institutions and secondary market investors. She is an author and a nationally recognized speaker on the topic of mortgage fraud. Ms. Dollar is a shareholder with the law firm of 
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