Executive Sentenced for Sophisticated Mortgage Scam

Allison Tussey —  March 16, 2012 — Leave a comment

Nicole G. Hathaway, 34, New Kent, Virginia, former President of Mortgage Solutions II, was sentenced to 33 months in prison for her involvement in a two-year mortgage loan fraud scheme.

Mortgage Solutions II was a Virginia limited liability corporation involved in the origination and brokering of mortgage loans. Through court documents, Hathaway admitted that in order to obtain loan commissions, she attempted to obtain nine different fraudulent real estate mortgage loans in amounts totaling over $1 million.

The sophisticated scheme defrauded Freedom Mortgage, Mount Laurel, N.J.; Washington Mutual Bank, Seattle, Washington; CitiMortgage, O’Fallon, Missouri; New South Federal Savings Bank, Birmingham, Alabama; the Federal National Mortgage Association, known as Fannie Mae; and the Federal Home Loan Mortgage Corporation, known as Freddie Mac. One of the nine attempted loans was refused. The total loan losses on the other eight approved loans were approximately $568, 293.

Documents show that the scheme involved overstating the creditworthiness of the buyers and inflating the value of the properties. The scheme had a number of knowing participants, including a loan originator, a realtor/investor, buyers, property sellers and others. The conspirators fraudulently orchestrated real estate deals with mortgage loans wherein the buyers’ creditworthiness was mischaracterized in two ways.

In the application phase, the conspirators would find a borrower to participate in the scheme and then make false statements on the mortgage loan application for such items as employment, income, and assets to inflate the borrowers’ creditworthiness. Because the borrowers typically did not have sufficient assets to even make a down payment or pay closing costs, the conspirators inflated the purchase price so that the seller or others could secretly make the payments with the proceeds of the loan.

In the settlement or closing phase of the fraud, Hathaway and co-conspirators would create false backup documentation to “corroborate” that the buyer had paid the down payments and closing costs. This caused the settlement agents to falsely state on the HUD-1 Settlement Statements that the buyers had paid the down payments and closing costs. The end result was that the buyers’ creditworthiness was overstated and the value of the property was inflated.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia; Kenneth R. Taylor, Jr., Special Agent in Charge of HUD’s Office of Inspector General Capital Region; Keith Fixel, the Inspector in Charge of the Charlotte Division of the Postal Inspection Service; and Michael F.A. Morehart, Special Agent in Charge of the FBI’s Richmond Field Office, made the announcement after sentencing by United States District Judge James R. Spencer.

The case was investigated by HUD’s Office of the Inspector General, the United States Postal Inspection Service, and the FBI’s Richmond Division. Assistant United States Attorney David T. Maguire is prosecuting the case on behalf of the United States.

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Allison Tussey

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