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83 Indicted In Cleveland

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Julio E. Sune Jr. (FL)

Senior Member
Jan 16, 2002
Professional Status
Certified Residential Appraiser
SOURCE: mortgagedaily.com--[9-9-02]

83 Indicted In Cleveland Fraud Scheme

Underwriters, appraisers among defendants

September 9, 2002

A federal grand jury has indicted scores of people in an Ohio mortgage fraud scheme. Many Cleveland-area employees of a national net branch mortgage brokerage company were involved in the scam.

The U.S. Department of Justice recently announced that 83 individuals have been indicted by a Cleveland grand jury for participating in mortgage fraud schemes. The indictments are the result of a two-year federal investigation code named "Collateral Damage." Among the charges are money laundering, bank fraud and false statements.

The defendants, including employees of some Cleveland-area franchise offices of American Home Loans, are accused of preparing and providing fraudulent loan files to wholesale mortgage lenders. Other defendants accused of being coconspirators include appraisers, underwriters and an accountant.

American Home Loans, based out of California, is a national net-branch mortgage operation. In many net-branch arrangements, mortgage loan originators operate in a quasi-self employed manner, generating loan applications themselves while benefiting from the clout generated by the collective production of all of the company's other net branch offices. Net branch companies often pay a greater percentage of fees to the originator than lenders, mortgage bankers or mortgage brokers.

The announcement, which was from the U.S. Attorney's office in Cleveland, said that 30 employees from six American Home Loan Cleveland-area franchise offices were implicated. Neither American Home Loan's corporate office in California or other branches are implicated in the indictment.

The conspiracy started in early 1998 and continued until August 2001, according to the announcement. Mortgage loan files were submitted to wholesale lenders, including Firstar Bank and Star Bank, that included fake paystubs & W-2's, fake social security numbers and fake deposit verifications. In addition, some of the defendants are accused of falsely verifying the employment of applicants when contacted by the lenders.

The defendants allegedly used phony invoices for property rehabilitation services to retain a substantial portion of loan proceeds.

Two defendants allegedly attempted to collect Section 8 rent subsidy payments from the Department of Housing and Urban Development on some of the properties.

American Home Loans did not respond to MortgageDaily.com's request for a statement. :evil:
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