Tuesday, October 28, 2008

NY Man Indicted For $20M Mortgage Fraud Scheme

Osmond Decoteau, 48, was indicted and charged with wire fraud for masterminding a scheme to defraud mortgage lenders and banks of more than $20 million in connection with the sale of several properties located in Brooklyn, New York and Florida. The defendant’s arraignment is scheduled before U.S. Magistrate Judge Roanne L. Mann at the U.S. Courthouse in Brooklyn.

Mortgage lenders often employ loan servicers to collect monthly mortgage loan payments from homeowners and remit the payments to the lender in exchange for a monthly fee.  When a property is sold or a mortgage is refinanced, the lender issuing a new loan typically wires the proceeds to the closing attorney, who in turn sends a portion of the proceeds to a loan servicer to pay off any pre-existing mortgage liens.

As alleged in the indictment and an underlying complaint, Decoteau recruited straw purchasers for properties located in Brooklyn and Florida, and ensured that their mortgage applications would be approved by lenders by fraudulently misrepresenting the purchasers’ financial condition.  Subsequently, at the closings on these properties, Decoteau presented phony payoff letters which indicated that three companies he controlled were the loan servicers for the properties.  The closing attorneys then issued payoff checks to the Decoteau-controlled entities, instead of the actual loan servicers for the holders of the pre-existing mortgages.  To conceal the fraud, Decoteau caused monthly payments to be made on the underlying mortgages so that those mortgages would not be declared delinquent.  As a result of the defendant’s scheme, between April 2005 and January 2007, multiple fraudulent closings occurred resulting in a fraud exceeding $20 million, and each of the properties is now encumbered by two first-lien mortgages.

“In May of this year we announced the formation of a task force comprised of federal, state and local law-enforcement agents and investigators to address the burgeoning problem of mortgage fraud,” said U.S. Attorney Campbell.  “This prosecution is one example of the results of that cooperative initiative, which includes the investigation and prosecution of mortgage fraud that has harmed investors, lenders and homeowners across the country.”

“Combating mortgage fraud is a priority because mortgage lending and the housing market have a significant overall effect on the nation’s economy.  The FBI is committed to investigating and prosecuting criminals who exploit vulnerabilities and devise new methods or schemes to defraud,” said FBI Assistant Director-in-Charge Mershon.

“The FDIC OIG is committed to its partnerships with others in the law enforcement community as we address mortgage fraud cases throughout the country,” said FDIC Inspector General Rymer.  “Now, more than ever, the American people need to be assured that their government is working to ensure integrity in the financial services and housing industries and that those involved in criminal activities that undermine that integrity will be held accountable.”

If convicted, Decoteau faces a maximum sentence of 20 years of in prison.

The government’s case is being prosecuted by Assistant U.S. Attorneys Jonathan E. Green and Daniel Spector.

mortgage fraud