Originator’s $40M Mortgage Scam Led to Bank Merger

Allison Tussey —  November 8, 2012 — Leave a comment

Thomas Gregory Alexander, 61, San Diego, California, was sentenced by U.S. District Chief Judge Roslyn O. Silver to 10 years in federal prison, to be followed by five years of supervised release. Alexander was also ordered to pay $5,463,769 in restitution.

As previously reported by Mortgage Fraud Blog, Alexander pleaded guilty on June 9, 2011, to wire fraud and conspiracy to commit wire fraud.

According to court documents, Alexander worked as a loan originator for American Mortgage Funding (AMF) between 2005 and 2007. Though AMF, Alexander assisted borrowers to qualify for loans from Mesa Bank (now known as Sunrise Bank of Arizona). Borrowers used the loan funds to acquire parcels of land in Maricopa County and to fund the construction of custom homes on those parcels.

Alexander concocted a scheme to defraud Mesa Bank by creating fraudulent documents for unqualified borrowers. In many cases, Alexander directed the borrower to sign a blank Uniform Residential Loan Application (URLA), which he and his co-conspirators would then complete by 1) overstating the borrower’s monthly income; 2) overstating the amount of money in the borrower’s bank accounts; 3) falsely representing that the borrower would make a down payment at closing; and 4) misrepresenting the intent of the borrower to use the property as a primary residence.

Alexander and his co-conspirators would also alter Verification of Deposit documents to falsely overstate the amount of money in the borrowers’ bank accounts and alter the borrower’s credit report to falsely represent a higher credit score. Alexander and his co-conspirators also submitted false documents to show that the borrowers had made the required five to 10 percent down payments when, in fact, none of the borrowers ever actually paid a down payment.

In addition to submitting false loan documents, Alexander also directed many of the borrowers to acquire loans to purchase lots from Sea Rock LLC, a company that he owned. The borrowers were unaware that they were purchasing lots owned by their loan originator. Alexander ultimately received a significant amount of profit from the lot sales because he directed a co-conspirator to create false appraisals to inflate the prices of the lots.

In total, Alexander‘s mortgage fraud scheme induced Mesa Bank to issue over $40 million in loans and caused tens of millions of dollars in losses to the bank. The substantial loss eventually led to Mesa Bank‘s merger into Sunrise Bank of Arizona.

Alexander was prosecuted under the Operation Stolen Dreams initiative, which was initiated in June 2010. Operation Stolen Dreams targeted mortgage fraudsters throughout the country and was the largest collective enforcement effort ever brought to bear in confronting mortgage fraud. The operation was organized by the Mortgage Fraud Working Group of President Obama’s interagency Financial Fraud Enforcement Task Force, which was established to lead an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. Operation Stolen Dreams targeted 1,517 criminal defendants nationwide, included 525 arrests, and involved an estimated loss of more than $3 billion.

The investigation in this case was conducted by the United States Internal Revenue Service-Criminal Investigation and the Federal Bureau of Investigation. The prosecution was handled by Raymond K. Woo and Jennifer F. Levinson, Assistant U.S. Attorneys, District of Arizona, Phoenix.

Allison Tussey

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