Grand Jury Indicts Mortgage Brokers for Fraud

A federal grand jury has indicted four mortgage brokers and real estate agents for allegedly running a mortgage fraud scheme that allegedly netted them $277,000 in illegal commissions and payments for 19 homes.^[1] The four men are accused of recruiting buyers to purchase homes in Elk Grove last year with no money down.^[2] The buyers were told that renters would make the mortgage payments and buy the homes from them after two years. But after the mortgages were processed and the defendants collected loan commissions and real estate fees, none of the renters materialized.^[3] The four also allegedly inflated the buyers' incomes in loan applications to subprime lenders.^[4]

Assistant U.S. Attorney Matt Stegman said the case is one of several mortgage fraud cases his office is investigating in the wake of a fallout in housing prices that experts have partially attributed to subprime mortgage loans and inflated housing prices.^[5]

James Martin, Mario Fellini III, Gabriel Viramontes, and Joseph Gallo were all indicted on charges of bank fraud and conspiracy to launder money for their alleged roles in the fraud in question.^[6] Martin, Fellini and Gallo also were indicted on charges of making false statements on loan applications, while Martin, Fellini and Viramontes were indicted on mail fraud charges.^[7] Martin, Fellini and Gallo pleaded not guilty to the charges in federal court Tuesday, and Viramontes was scheduled to appear next week.^[8]

Mortgage Fraud is covered under 18 U.S.C. § 225 which is also called continuing financial crimes enterprise and it states that whoever organizes, manages, or supervises a continuing financial crimes enterprise; and receives $5,000,000 or more in gross receipts from such enterprise during any 24-month period, shall be fined not more than $10,000,000 if an individual, or $20,000,000 if an organization, and imprisoned for a term of not less than 10 years and which may be up to life.^[9] For purposes of subsection (a), the term “continuing financial crimes enterprise” means a series of violations under section 215, 656, 657, 1005, 1006, 1007, 1014, 1032, or 1344 of this title, or section 1341 or 1343 affecting a financial institution, committed by at least 4 persons acting in concert.^[10]

Federal criminal attorney Douglas McNabb has also previously discussed all of the federal crimes discussed in this blog previously, these can be found here. Specifically, mail fraud can be found, here; money laundering can be found here; and mail fraud can be found here.

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^[1] AP Staff, Four Indicted In Alleged Scheme To Get Mortgages, Associated Press Newswire, September 26, 2007, available at LEXIS, News Library, Wire News Services.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] Id.
^[9] 18 U.S.C. § 225(a)(2007).
^[10] Id., at §225(b).