Annapolis Loan Officer Pleads Guilty to Mortgage Fraud Scheme
Baltimore, Maryland - James Dan, age 45, of Annapolis, Maryland pleaded guilty today 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 homeless and with no equity.
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 of the Housing and Urban Development Office of Inspector General - Office of Investigations.
According to his plea agreement, James Dan met an associate in Annapolis when both were loan officers for a mortgage lender. Although Dan left the mortgage company in 2005, Dan and the associate stayed in contact with each other.
Beginning in 2006, the associate 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. The associate, sometimes in Dan’s presence at closings, told potential victims that they could "rescue" them and save their houses. The promises involved transferring the home to Dan, who through his excellent credit, could obtain a new mortgage loan. Dan promised to make the payments on the new mortgage loan for six months or for a year. The individual would "repair" their credit and then refinance the property and reacquire it. During this six month or one-year period, the individual was to continue living in the house.
Dan, as a mortgage loan officer, was aware of the implications of the sale: that the seller who deeded away his or her home lost control of their home; that the person who was facing foreclosure today would not likely be able to afford a mortgage loan at a higher amount a year from now; that the individual who could not qualify for re-financing today would not qualify for a mortgage loan in a year and could not re-purchase their home; that Dan and his associate could not likely afford to make the mortgage payments for more than six months or a year and might default on the new mortgage; and that the house had equity which Dan and his associate were taking out at settlement for their own uses.
In order to obtain the mortgage loan, Dan signed and submitted loan applications that falsified his intent to occupy the property, annual income, savings, other properties owned and source of the borrower's funds for closing.
On August 4, 2006 and April 5, 2007, Dan and his associate attended settlements for Dan to buy properties in Capitol Heights and Pasadena, Maryland. On August 21, 2006, his associate, with a power of attorney from Dan, attended a closing for Dan to purchase a Hagerstown, Maryland property. The settlement statements (sometimes called HUD-1s) used at the settlements were false. For example, Dan was supposed to produce the buyer's funds to close for each settlement out of his own resources. These funds actually came from the seller's proceeds so that Dan invested no funds of his own in any transaction. Although Dan was the buyer of properties, Dan and his associate 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 Dan, his associate or one of their companies monies that were identified on the HUD-1 as the sellers' proceeds of the property sales. Dan and his associate 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. Dan spent some of the proceeds on personal expenses. Although Dan made some mortgage payments on each of the properties, he did not escrow funds to make mortgage payments, and eventually he ran out of money. He defaulted on the mortgage loans, and the loans all went into default. Two victims have lost their homes.
The government contends that the sellers lost $262,059 from these three settlements, and the lenders lost at least $308,612, with the final loss dependent upon the results of the foreclosure proceedings.
Dan 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 September 2 , 2010 at 10:00 a.m.
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 commended Assistant U.S. Attorney Joyce K. McDonald, who is prosecuting the case.