Tuesday, October 30, 2007

Kansas Mortgage Fraud and Conspiracy Trial Postponed

Trial in the case against F. Jeffrey Miller has been postponed due to its complexity. The Judge has not yet set a new trial date. Miller, a developer, and his co-conspirators in Kansas were indicted for an alleged scheme involving the sale of homes constructed by Miller to homebuyers that would otherwise not qualify, through the use of false documents and inflated appraisals. The charges include one count of conspiracy, 52 counts of bank fraud, five counts of money laundering, and forfeiture. Angela Parenza and Elizabeth L. Hessel, both formerly loan officers with one of Miller‘s companies, entered guilty pleas to count one of the indictment and agreed to testify against the other defendants.

On October 16, 2006, Angela Parenza entered a guilty plea to count 1 of the indictment, stating in the petition to enter the plea that she ”provided down payments to homebuyers from Jeff Miller without disclosing that to lending institutions, among other over acts.” Elizabeth Hessel entered a plea of guilty as to count 1 of the indictment.

The guilty pleas of both Parenza and Hessel state that the object of the conspiracy was to enrich the conspirators by manipulating home buyers, manipulating appraisal and submitting materially false and fraudulent loan applications to obtain loan proceeds from federally insured financial institutions.

According to the pleas, as part of the scheme, the coconspirators:

Advertised in newspapers that homes would be sold to home buyers with poor credit and financial problems for little or no down payment. They established a “One Stop Shop” for home buyers by establishing Associated Capital and Associated Finance to go along with Miller’s building company, Miller Enterprises. Homebuyers that went to Miller Enterprises to pick out a home could also obtain financing Miller thereby controlled the flow of information to the lender.

The One Stop Shop was turned into a fraudulent real estate machine as Miller manipulated the appraisal process. He obtained intentionally inflated appraisals by (1) refusing to pay the appraisers if his price was not met and (2) manufacturing comparables by selling homes in subdivisions to his employees at inflated prices and then agreeing to forgive the second mortgagees on the homes. Miller also falsified loan applications and accompanying documents such as tax returns, employment verifications, rental agreements, rental verifications and payment histories in order to qualify borrowers for loans that they would not have otherwise been able to obtain. He would also provide home buyers with down payments and closing costs without disclosing this to the lenders.

The homeowners would be manipulated into moving into the home before closing. The sales price would then be increased and closing - creating a situation where the homeowners were forced to chose between closing on the home with the increased sales price or facing eviction and homelessness. The increased sales price would be secured by a second mortgage with an illegal interest rate serviced through his company, Associated Finance. Miller and Earnshaw created a form called the Principal Reduction Form to reduce the second mortgage balance by permitting the homeowner a discount on the mortgage if the reduced amount was paid off in a specified time.

The conspiracy was later reconfigured to sell homes to investors in volume. The actual sales price was discounted but this was not disclosed to the lenders who continued to be provided with false documentation on the financial condition of the investors as well as false lease/purchase agreements. Miller would also pay the investors undisclosed kickbacks that were concealed as referral fees or interior design fees.

According to the guilty please, $25,042,670.39 in loan proceeds were obtained from federally insured financial institutions in connection with the conspiracy.

Click here for the original Mortgage Fraud Blog article on the indictment.

mortgage fraud

1. Look back in history and go to the point where the “combined business arrangement” was started.
   You could consider that the beginning of this nonsense.

   Should be called the “one stop chop shop”.

   Then came Uncle Alan Greenspan unprecedented rate cuts and the profits that followed in the mortgage industry.

   Automated underwriting engines replaced human being underwriters to allow huge volumes to be funded and funded fast.

   That period from 9/11 to about mid 2003 is a blur. Refinanced some of my clients five times without charging any costs. It was ridiculous.

   Wall Street noticed though and they had to get their greedy mitts in the mortgage origination world.

   They created no money down and no income verification programs for people that used to rent previously. Bad credit, no proof of income and no skin in the game equals a bad result.

   Currently it seems that ex Goldman Sachs guys are running this country.

   Paulsen should read his job description and start performing instead of trying to help “friends of Goldman”

   I have no problem sleeping at night.
   Why not?

   I originated only 3 sub prime loans in 22 years.

   Dan K Addison, IL

   Posted by  on  10/30  at  06:12 PM

2. What recourse do the victims/duped homeowners have in this case?  I have been in contact with one victim looking for direction on how to pursue some resolution.

   Posted by  on  11/02  at  09:35 AM

3. Miller and Steven Vanetta, through Starland Development, did the same thing here in Missouri and nearly every house in my neighborhood (developed by them) has suffered a foreclosure. At this time there is little we can do, it seems. Our file is tied up in the KS case and the Attorney General’s Office has not indicated they do not know much. We’re stuck waiting as we try to get Starland to release our 2nd mortage. Fraudulent signatures, initials, and charges were involved. Anyone know how homeowners are able to get any quicker recourse/results?

   Posted by  on  11/25  at  07:10 PM