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NC Mortgage Brokers found GUILTY

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Certified Residential Appraiser
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Posted on Sat, Nov. 23, 2002

2 couples found guilty in record mortgage fraud
$21 million swindle involved reselling false loans to investors
PETER SMOLOWITZ
Staff Writer

Two Charlotte couples were found guilty Friday in what authorities called the largest mortgage fraud case ever investigated by the FBI.

James and Macy McLean and Paul and Debbie Zimmerman were convicted after a nine-day trial in Asheville. The couples had been charged in connection with a sophisticated scheme to swindle $21 million from a federal mortgage program.

"It's not just the government that is harmed by this," said Assistant U.S. Attorney Mike Savage. "How many houses could we have bought for working families with $21 million?"

The defendants will be sentenced in about two to three months, along with three others from Charlotte -- Richiedean Gess, and husband and wife, Willie and Alice Green -- who had earlier pleaded guilty. The four found guilty Friday are expected to appeal.

After the verdict, James McLean, 36, was immediately taken into custody.

"This is a difficult day for my client," said Claire Rauscher, who represented Macy McLean, 33. "It was maybe more difficult for her and her six children when her husband was taken into custody."

Defense attorneys declined to discuss what will happen to the couples' children.

The McLeans own First Beneficial Mortgage Corp. and the Zimmermans worked there and were partners in First Beneficial Homes, a subsidiary of the mortgage company.

The McLeans were accused of selling false mortgage notes on the secondary mortgage market by falsely representing that they were actual mortgage loans insured by the Federal Housing Administration, an agency of the U.S. Department of Housing and Urban Development.

Federal authorities said the homes did not exist and the lots were usually vacant.

The May indictment said the McLeans pooled false mortgages and sold them to investors in the form of mortgage-backed securities guaranteed by the Government National Mortgage Association, also known as Ginnie Mae. Ginnie Mae is administered by HUD.

Paul Zimmerman, 44, and Debbie Zimmerman, 42, were charged with conspiracy, wire fraud and making false statements.

Federal authorities have said the nation's slumping economy is fueling an increase in mortgage fraud. Analysts have said the fraud is rising in Charlotte and other cities as the economy shriveled the healthy profit margins mortgage brokers enjoyed in the late 1990s.

Some estimate mortgage fraud accounts for about $30 billion in losses annually.

The First Beneficial investigation prompted officials to add new checks in the federal mortgage program to prevent future fraud, said U.S. Attorney Bob Conrad and Chris Swecker, who heads the FBI in North Carolina.

As Conrad promised to continue cracking down on corporate fraud, Swecker offered advice for consumers.

"People need to do an independent appraisal of their property and make sure it's worth what the market says it's worth -- not what some in-house appraiser says it's worth," he said. "They won't know until foreclosure time that the property is not worth what they think it's worth."


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Peter Smolowitz: (704) 358-5249; [email protected]
 
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