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Feb. 17, 2011

OWNER OF “BROWNSTONE CONSTRUCTION” SENTENCED TO PRISON FOR MORTGAGE FRAUD

(HOUSTON) - Melvin Lendall Brown, a Houston area resident, has been sentenced to prison for wire fraud arising from a mortgage fraud scheme, United States Attorney José Angel Moreno announced today. 

This morning, United States District Judge David Hittner sentenced Brown, 48, to 57 months in prison for his wire fraud conviction arising from an elaborate mortgage fraud scheme in which Brown was an organizer and leader. Brown pleaded guilty to a single count of wire fraud arising from the scheme on April 20, 2010. The scheme, carried out between June 2004 and June 2005, involved numerous misrepresentations on mortgage loan applications prepared for recruited straw purchasers and supported by fraudulent documents. As a result of the scheme, Brown ultimately received, often via interstate wire transfer, more than $500,000 of approximately $5 million in fraudulently-induced loan proceeds from lenders to title companies. The court will determine the amount of restitution it will require Brown to pay within 90 days.   

To carry out the scheme, Brown used an unincorporated business he formed under the assumed name of Brownstone Construction, which was supposedly in the business of home improvement. People he associated with located residential real estate properties in the Houston area. Brown and others recruited and solicited individuals with good credit to act as borrowers in applications for residential mortgage loans to purchase one or more of those properties even though the borrowers had no intention of making payments on the mortgage loans. Brown, aided and abetted by at least one other person, made representations to each borrower, including that he would buy the home in the borrower’s name, make any monthly mortgage payments, find others to live in the home and pay monthly rent, take the home out of the borrower’s name after a period of time as well as compensate the borrower. 

Brown and others caused Uniform Residential Loan Applications to be made in the names of the borrowers that overstated their employment income and other assets, understated or omitted their debts and other liabilities, falsely represented that the borrowers leased the homes they resided in and received income from the rent and falsely claimed that the borrowers intended to occupy the newly purchased homes. Because of the fraudulent information, the lenders made decisions to approve the applications and fund the loans. In support of those fraudulent loan applications, false and fraudulent documents were submitted, including sham lease agreements and bogus employment information. Brown also provided funds to the borrowers to use for deposits toward the purchases of those homes and for closing fees, and he often appeared with the borrowers at the closings. 

At or near the closings, Brown caused title companies to disburse the fraudulently-induced loan proceeds to various individuals and entities, including Brownstone Construction. He represented to the title companies that Brownstone Construction had been hired for projects to improve those properties, when in fact he did not perform or arrange for others to complete the projects. Brown received, often via interstate wire transfer, more than $500,000 of approximately $5 million in fraudulently-induced loan proceeds, sent via interstate wire from lenders to title companies. Brown used the funds he received for expenditures unrelated to the properties that were purchased.

Brown was immediately taken into custody after sentence was pronounced. After he serves his prison term, he will begin a term of three years of supervised release. 

Special agents from the Houston field office of the FBI and from the Department of Housing and Urban Development Office of Inspector General conducted the investigation leading to the charges. Assistant United States Attorney Stephen L. Corso prosecuted the case.

 

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