Linda Sadr, 51, Manassas, Virginia, pled guilty to mail fraud, wire fraud, and money laundering in relation to a “mortgage elimination” scheme that caused more than $10 million in losses.
Sadr was indicted on November 23, 2010, by a federal grand jury on two counts of mail fraud, four counts of wire fraud, and two counts of money laundering. Sadr plead guilty to all counts of the indictment. Sadr faces a maximum penalty of 20 years in prison on each count of mail and wire fraud and 10 years in prison on each count of money laundering when she is sentenced on May 6, 2011.
From 2004 through 2008, Sadr marketed a scheme known as a “Mortgage Elimination Program.” Sadr represented to the homeowners that lenders making refinance loans were operating illegally by, among other things, bundling the loans for resale and selling them to investment banks, which then used the loans as collateral to borrow additional funds. Sadr fraudulently represented to homeowners that she and her companies could arrange for the satisfaction of the homeowners’ mortgages on their residences. Sadr represented that she would challenge the lenders, on behalf of the homeowners, for their purported illegal actions, would prevail in the challenges, and would thereby eliminate the mortgages.
In general, those homeowner clients with sufficient equity in their homes who participated in the Mortgage Elimination Program were required to refinance their mortgages with maximum cash-out refinance loans. Subsequent to settlement, individual homeowner clients were required to pay 10 to 15 percent of the proceeds of the cash-out refinance loan as a fee to Sadr or to one of the entities she controlled. Clients were also required to give Sadr the equivalent of 12 to 18 months of advance mortgage payments to be held in “escrow,” an amount that Sadr claimed she would use to pay the refinanced mortgages for the homeowner clients until their mortgages were eliminated.
In addition to participation in the Mortgage Elimination Program, Sadr offered some clients the option of investing equity from their refinance or other monies in exchange for a guaranteed rate of return of 12 to 18 percent. Sadr guaranteed that the principal on those investments would be refunded at the end of the investment period.
Sadr recruited her mortgage elimination services to new clients via word of mouth through satisfied past homeowner clients, who thought their mortgages had been eliminated through monetary settlements received from Mortgage Elimination Program challenges. In reality, the mortgages were eliminated because Sadr repaid the refinance lenders in full. In so doing, Sadr used the monies she obtained from other unsuspecting homeowner clients without their knowledge or consent.
None of the more than 150 participants in the program received reconveyances on their homes and none received refunds from Sadr for the fees that were paid to her or the principal on the investments they made through Sadr and her entities. To date, the known homeowner client victim loss from Sadr‘s mortgage elimination scheme and related high-yield investment scheme exceeds $10 million.
Neil H. MacBride, United States Attorney for the Eastern District of Virginia, and James W. McJunkin, Assistant Director in Charge of the FBI Washington Field Office, made the announcement after the plea was accepted by United States District Judge Liam O’Grady.
This case was investigated by the FBI Washington Field Office. Assistant United States Attorneys Marla Tusk and Jack Hanly are prosecuting the case on behalf of the United States.