ALLENTOWN REAL ESTATE AGENT AND MORTGAGE BROKER CHARGED IN PREDATORY LENDING SCHEME

September 28, 2004 - PHILADELPHIA – United States Attorney Patrick L. Meehan, F.B.I. Special Agent-In-Charge John C. Eckenrode, and I.R.S. Special Agent-In-Charge Jerome Lisuzzo today announced the filing of an Information* charging PATRICK BALF and DONALD STONE with ten counts of wire fraud and aiding and abetting, in violation of 18 U.S.C. §§ 1343 and 2. The Information also charges PATRICK BALF with one count of tax evasion, in violation of 26 U.S.C. § 7201; PATRICK BALF with four counts of failing to file tax returns, in violation of 26 U.S.C. § 7203; and DONALD STONE with four counts of filing false tax returns, in violation of 26 U.S.C. § 7206(1). These charges arise from a mortgage fraud scheme involving properties valued at more than $1.5 million.

"Many people lost their homes because of this scheme and many more are struggling to keep up with expensive mortgages they just can’t afford," said Meehan. "Schemes like this often trigger an increase in foreclosures which can destabilize and eventually implode a community."

Defendant Balf worked as a real estate agent at The Real Estate Center, a company located in downtown Allentown, Pennsylvania. Defendant Stone worked for a mortgage brokerage company called The Mortgage Access Center, located in the same building as The Real Estate Center. Defendant Balf would find buyers for houses in a limited area of Allentown. He would then refer the majority of these buyers to The Mortgage Access Center for mortgages. These buyers were "subprime" borrowers. "Subprime" borrowers are individuals with damaged credit who are unable to obtain financing from banks and other finance companies at the lowest market rates, leaving them with few options in the mortgage lending market. The majority of the buyers involved in the scheme were Hispanic.

Defendants Balf and Stone, along with others, arranged the mortgage financing for these buyers. The defendants and others falsified loan documents submitted to mortgage lending companies to make it appear that the buyers met underwriting criteria set by those companies. For example, the defendants and others falsified documents listing the employment history of buyers, verifying the income of buyers, and detailing the amount and origin of cash used to purchase the houses.

The defendants and others referred to the process of falsifying these documents as "creative financing." The result of the scheme was that the defendants and others made it appear that otherwise unqualified buyers were qualified for mortgage financing. The scheme lasted from 1998 through 2003 and involved several hundred transactions. The investigation is ongoing.

"They called it ‘creative financing’ but we call it fraud," Meehan said. "These cases are about protecting our neighborhoods. If we can help to keep people in their homes, we can nurture the kind of cohesive neighborhoods that are the bedrock of safe, secure communities."

If convicted, defendant Patrick Balf faces a maximum possible sentence of 59 years imprisonment, 3 years supervised release, a $2,700,000 fine, and a $1,200 special assessment. If convicted, defendant Donald Stone faces a maximum possible sentence of 62 years imprisonment, 3 years supervised release, a $2,900,000 fine, and a $1,400 special assessment. Restitution may also be ordered against the defendants.

DEFENDANT	ADDRESS	AGE [Date of Birth]
Patrick Balf	1627 Linden Street Allentown, PA 18102	March 17, 1953
Donald Stone	2242 Tilghman Street Allentown, PA 18103	January 22, 1948