Mortgage-fraud laws are getting results

At the end of the housing boom, Arizona regulators and market watchers were on high alert for mortgage fraud. Metro Phoenix had become ground zero for many illegal home sales that inflated prices and led to record foreclosures.

The state's lack of laws against real-estate and mortgage fraud and the huge run-up in home prices helped mask some of the bad deals. But when the housing market started to slow in late 2006, "cash-back" and other types of mortgage fraud became very apparent.

During the past few months, there have been several successful prosecutions of real-estate and lending fraud. Mortgage fraud, a white-collar crime, has been more difficult to prosecute in the past, but new laws and efforts by state and federal prosecutors are getting more results.

In late May, Phoenix resident Paige Kinney, aka Jaime Lee Lawler, 42, pleaded guilty in two mortgage-fraud cases. She admitted leading a $40 million mortgage-fraud scheme involving Countrywide Home Loans as well as committing bankruptcy, bank and mail fraud.

"This defendant's fraudulent activities were pervasive - she targeted financial institutions, she undermined the integrity of the Bankruptcy Court and she stole from an insurance company," U.S. Attorney Dennis Burke said.

His office worked with the FBI and the Arizona Mortgage Fraud Task Force on the Kinney cases.

Kinney admitted that between 2005 and 2007, she and others worked a cash-back scheme by recruiting straw buyers to purchase houses they never intended to live in and obtained mortgages they didn't legally qualify to receive. She arranged for loan applications to be submitted with false income, employment and asset information. The loans, totaling almost $40 million, were also made based on inflated property appraisals. The excess cash totaling $9 million was then diverted to Kinney and her co-conspirators. She pleaded guilty to 13 felony offenses.

In another case, Phoenix real-estate agent Jason Thomas Williams, 31, recently pleaded guilty to conspiracy to commit wire fraud that was related to a mortgage-fraud scheme based in the Valley. Three others have also entered guilty pleas, including loan officer Benjamin Jackson. The last defendant, Joseph Bowen Brown, goes to trial next month.

The case against the group is based on an IRS investigation of cash-back deals done during the boom. Williams acknowledged he handled mortgage applications for unqualified straw buyers that contained false information. Williams and others concealed cash kickbacks to the straw buyers. The conspiracy involved 49 homes, all later were foreclosed on, and cost lenders $10 million.

Through a third cash-back scheme, Dustin Thompson, 32, of Phoenix, was recently sentenced to 27 months in prison. The illegal deals he was involved in cost lenders $4 million and involved fraudulent loans for 24 metro Phoenix homes.

"Driven by greed, this defendant schemed the system and engaged in the type of mortgage fraud that has destroyed property values, lending institutions, and entire neighborhoods in our community," Burke said.

by Catherine Reagor The Arizona Republic Jun. 8, 2011 12:00 AM




Mortgage-fraud laws are getting results