Mortgage Fraud Blog is the premier website for news and information on mortgage fraud and real estate fraud throughout the United States.
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
Mortgage Fraud Blog is co-sponsored by Interthinx the leading provider of fraud services and solutions for the mortgage industry.
Three Men Plead Guilty in North Carolina Mortgage Fraud
Two businessmen and a real estate lawyer pleaded guilty in connection with a North Carolina mortgage fraud scheme involving more than 20 properties.
Charles Richardson Jr. and Phillip Wayne Middlebrooks plead guilty to mail fraud and attorney Rick Franklin Shumate pleaded guilty to lying to the FBI. The trio were originally indicted on June 28, 2005, in a 20-count federal indictment
According to court documents, between August 1999 and January 2001, Richardson and Middlebrooks, with the assistance of others (including, in most cases, a mortgage broker from Oasis Mortgage Company), caused multiple fraudulent real estate transactions in and around Guilford County, North Carolina. Richardson and Middlebrooks would identify real property for sale, recruit straw buyers to obtain mortgage loans to purchase the property at prices substantially above the actual sales prices, and provided or caused the provision of false information to lenders (e.g. employment, intent to occupy). Richardson and Middlebrooks would routinely complete paperwork, such as sales contracts, reflecting that they owned the properties when they did not and thus concealing the flip.
Richardson and Middlebrooks enlisted the services of attorney Shumate in connection with closing the transactions. Shumate submitted or caused to be submitted, preliminary opinions of title for numerous transactions involving Middlebrooks and Richardson which reflected they owned property when they did not, thereby concealing the flip of property from the lenders.
The transactions were structured as ‘double-closings’ with the assistance of Shumate. Richardson and Middlebrooks would nominally purchase the real property at the lower price and simultaneously resell it to the straw buyers at a higher price. Mortgage loan funds intended for the use of the straw buyers were redirected to cover the purchase payments to the original sellers. Richardson and Middlebrooks skimmed off the fraudulently created ‘equity’ (i.e. the difference between the original sales prices and the amounts of the mortgage loans taken out in the names of the straw buyers.)
Richardson and Middlebrooks paid (or promised to pay) kick-backs to the straw buyers for participating in the scheme and deceived the straw buyers into believing that Richardson and Middlebrooks would make the mortgage payments and transfer the properties out of the names of the straw buyers. Although they did collect the rents from the properties, they did not keep up the mortgage payments and allowed the properties to go into foreclosure.
One of the transactions involved the purchase of 3220 Cross Tree Way, Winston-Salem, North Carolina on July 26, 2000 in the name of Paul Hairston, a straw buyer. This property was the third of four properties purchased in the name of Paul Hairston in less than two months. According to the factual basis submitted in support of Richardson’s guilty plea, when he was interviewed by the FBI about his involvement in these activities, he acknowledged that he and Middlebrooks had operated a ‘buyer-partner’ program where they paid ‘buyer-partners’ for the use of their credit in connection with purchasing residence in which the ‘buyer-partners’ would not live. He admitted that he and Middlebrooks had the ‘buyer-partners’ complete the initial loan applications falsely representing an intent to occupy and would provide the applications to a mortgage broker for submission to lenders. Richardson acknowledged that ‘buyer-partners’ were used to conduct multiple transactions and stated that he knew such transactions had to be done within a 30-day period. He further admitted splitting profits from the transactions with Middlebrooks, but failing to keep up mortgage payments as promised. Middlebrooks admitted similar facts according to the factual basis submitted in connection with Middlebrooks‘ guilty plea.
According to the factual basis submitted in connection with Shumate’s guilty plea, Shumate had Hairston execute multiple documents required by the lenders stating that Hairston was purchasing each property as a primary residence which he intended to occupy. Shumate then forwarded the documents with false representations to the mortgage lenders. According to Hairston, Shumate did not provide copies of the closing documents to Hairston. The factual basis states that Shumate claimed, in interviews with the federal authorities, that he would not close transactions for one person to purchase four properties each as a primary residence but that, in connection with the closings for Richardson and Middlebrooks, he did not realize that individuals purchased multiple properties as primary residences.
According to court documents, Richardson stated that he and Middlebrooks knew that fraudulent information was provided to mortgage lenders, including information as to the income of the buyer-partners. Richardson admitted that he was present at a meeting in which the mortgage broker who assisted in most of the transactions stated: “these are all phony loans anyway.” Richardson acknowledged that he was angry that the broker had discussed the fact openly in a meeting. Although Richardson denied direct involvement with the creation or submission of false information, according to the factual statement submitted in connection with the guilty plea, other evidence contradicts his assertions.
Richardson and Middlebrooks each face a maximum of five years in prison, three years supervised release and a $250,000 fine. As part of the guilty plea, Richardson and Middlebrooks each agreed to pay restitution of $7,650 to Member’s Credit Union and Richardson agreed to pay restitution of $185,000 to MacRich Capital, LLC
Richardson and Middlebrooks are scheduled to be sentenced March 15, 2006 and Shumate is scheduled for sentencing on March 27, 2006.
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...
Legal Disclaimer.
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 
mortgage fraud
