Thursday, August 28, 2008

Lawyer Indicted In Connection With Mortgage Stacking Scheme

Kevin Carey, 48, Middleboro, Massachusetts, a former Somerville real estate attorney, was indicted in connection with allegedly making false statements on mortgage applications and associated documents and using the funds secured from the loans for his own purposes, rather than paying off existing loans as directed by the new lenders.  Carey is charged with Larceny over $250 (8 counts) and Willfully Making a False Statement Regarding Financial Condition or Assets (7 counts). 

Authorities allege that, while practicing as a real estate lawyer in Somerville and Medford, Carey engaged in a scheme called “mortgage stacking” on four residential properties he or his family members owned.  The scheme allegedly involved serially refinancing the loans on these properties, without paying off the existing loans.  Carey was also the agent for a New England title insurance company which allowed him to issue title insurance policies on mortgage transactions he processed.  Title insurance policies protect lenders in the event that there are defects in the title of the property.

Authorities allege that on various occasions between April 2002 through September 2004, Carey performed the functions of closing attorney on mortgage loans on each of the properties involved.  Authorities allege that Carey “stacked” three mortgages on a home in Medford, Massachusetts, two mortgages each on two different properties in Everett, Massachusetts, and one mortgage on his personal residence in Medford. Carey also allegedly falsified information on mortgage loan applications by omitting certain mortgages on the various properties, and also signed a family member’s name on false mortgage applications and closing documents he created.  Authorities also allege that when he received the proceeds of the loans, Carey did not pay off the existing mortgages on these properties, but rather used the funds for his own benefit.  Authorities further allege that Carey issued title insurance policies or commitments in connection with the transactions, and the lenders were therefore protected.  However, ultimately the title insurance company suffered the financial loss.  Authorities believe that Carey stole over $2 million dollars in this manner.

Investigators believe that the lenders remained unaware of the problem because Carey continued to make monthly payments on all of the loans.  In November 2005, a database search by Fannie Mae flagged the multiple mortgages on one of the properties, triggering a notification to one of the lenders.  The lender then notified the title insurance company of the problem.  Lawyers for the title insurance company then referred the matter to the Attorney General’s Office in March 2006. 

Following an investigation by the Attorney General’s Office, a Middlesex Grand Jury returned indictments against Carey.  His arraignment in Middlesex Superior Court has not yet been scheduled.

The case is being prosecuted by Assistant Attorney General Margaret Parks of Attorney General Martha Coakley’s Corruption and Fraud Division, and was investigated by State Police assigned to the Attorney General’s Office and Investigator Carl Mullen of Attorney General Martha Coakley’s Financial Investigations Division.  The United States Postal Inspection Service also assisted in the case.

mortgage fraud