James William Fox II, 40, Crofton, Maryland, pleaded guilty to conspiracy to commit wire fraud in connection with a mortgage fraud scheme which promised to help homeowners facing foreclosure keep their homes, but left them with no equity and no longer holding the title to their properties.
According to Fox‘s plea agreement, he met James Hooper Dan, 45, Annapolis, Maryland, when both were loan officers at a mortgage brokerage in Annapolis. Beginning in 2006, Fox began to identify prospective borrowers who owned and had equity in their homes, but who could not afford their mortgage payments and were at risk of losing their homes because they were either in foreclosure, bankruptcy or financial distress. Fox, and sometimes Fox and Dan, told potential victims that they could “rescue” them and save their houses. The promises involved transferring the home to Fox or Dan, who would obtain a new mortgage loan. Fox and Dan promised to make the payments on the new mortgage loan for six months or a year, during which time the individual would “repair” their credit, refinance the property and reacquire it. During this six month or one-year period, the individual was to continue living in the house.
In order to obtain the mortgage loans in their names, Fox and Dan made materially false and fraudulent loan applications including falsification of their intent to occupy the property, annual income, savings, other properties owned, and source of the borrower’s funds for closing. Fox was typically the loan officer for Dan‘s loans and was aware of Dan‘s material misrepresentations.
According to the plea agreement, from April 20, 2006 through July 5, 2007, Fox and Dan transferred eight properties from financially distressed homeowners to themselves or straw purchasers they recruited. The properties were located in Waldorf, Capitol Heights, Baltimore, Silver Spring, Pasadena and Hagerstown, Maryland, as well as Glen Rock, Pennsylvania and Chesterfield, Virginia. The settlement statements (HUD-1) used at the settlements were false. In each instance, Fox, Dan, or the straw purchaser was supposed to produce the buyer’s funds to close at settlement from their own resources. These funds actually came from the seller’s proceeds, or from money borrowed from others, so that Fox invested no funds of his own in any transaction. Although Fox and Dan were the buyers of the properties, they obtained proceeds from the equity in the properties by making material false representations to financial institutions making the loans. In addition, the sellers paid over to Fox and Dan, or one of their companies, monies that were identified on the HUD-1 as the sellers’ proceeds of the property sales. Fox and Dan shared some of these proceeds with the sellers either directly or by paying off sellers’ debts, but put the remainder in their own bank accounts. Although Fox and Dan made some mortgage payments on each of the properties, they eventually defaulted on the mortgage loans, and all eight properties went into default. None of the victims is in title of their homes.
The government contends that the loss as the result of this scheme is between $1 million and $2.5 million, with the exact amount to be determined at sentencing. As part of his plea agreement, Fox will be required to pay restitution in the full amount of the loss. Fox faces a maximum sentence of 20 years in prison followed by three years of supervised release and a fine of $250,000. U.S. District Judge J. Frederick Motz scheduled his sentencing for December 16, 2010 at 9:00 a.m. Dan previously pleaded guilty to the same charge. No sentencing date has been scheduled.
The guilty plea was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; and Special Agent in Charge Ken Taylor, Jr. of the Housing and Urban Development Office of Inspector General – Office of Investigations.
The Maryland Mortgage Fraud Task Force was established to unify the agencies that regulate and investigate mortgage fraud and promote the early detection, identification, prevention and prosecution of mortgage fraud schemes. This case, as well as other cases brought by members of the Task Force, demonstrates the commitment of law enforcement agencies to protect consumers from fraud and promote the integrity of the credit markets. Information about mortgage fraud prosecutions is available http://www.justice.gov/usao/md/Mortgage-Fraud/index.html.
This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
United States Attorney Rod J. Rosenstein thanked the Maryland Crime Victims’ Resource Center, Inc. for their assistance to victims in this case.
United States Attorney Rod J. Rosenstein thanked the FBI and HUD-OIG, Office of Investigations for their work in this investigation and commended Assistant U.S. Attorney Joyce K. McDonald, who is prosecuting the case.