Former Loan Officer Pleads Guilty to Straw Buyer Scam

Allison Tussey —  October 24, 2011 — Leave a comment

Juan Carlos Hernandez, 42, West Warwick, Rhode Island, a former loan officer with National City Mortgage Company, pleaded guilty in U.S. District Court in Providence, R.I., to his role in a “straw-borrowing” scheme that netted more than $3.5 million in fraudulently obtained mortgages on 13 properties in five Rhode Island communities. All of the properties were eventually foreclosed upon by the banks holding the mortgages.

Hernandez was named along with two others in a 13-count federal grand jury indictment returned on May 24, 2011. Miguel Valerio, 52, Providence, R.I., a former loan processor with National City Mortgage Company; and James D. Levitt, 65, Pawtucket, R.I., a former real estate attorney, are awaiting trial.

In addition, Levitt is awaiting trial on a separate eight count indictment alleging three counts of bank fraud, three counts of wire fraud, and two counts of tax fraud in connection with mortgage transactions in Providence separate from the conspiracies outlined in the indictment charging Levitt, Juan Carlos Hernandez, and Miguel Valerio.

At the court hearing, Hernandez admitted that he conspired with Miguel Valerio to recruit and pay “straw-purchasers” to purchase properties in Cranston, Central Falls, Coventry, Pawtucket, and Providence, R.I., that the buyers would not normally qualify to purchase. He admitted that his intent was to take control of the properties, collect rent, and sell them within a short period of time, dividing the profits. The “straw-borrowers,” were paid various fees and were regularly advised that they would not be responsible for the mortgages for which they were applying.

Hernandez also admitted that he, Valerio and Levitt conspired to obtain “straw-purchasers” to apply for and obtain mortgages on four properties in which all three had a financial interest.

Hernandez is scheduled to be sentenced on January 20, 2012. Bank fraud is punishable by a maximum sentence of 30 years’ imprisonment and a $1,000,000 fine. Wire fraud is punishable by a sentence of up to five years’ imprisonment and a $250,000 fine. Conspiracy is punishable by up to five years’ imprisonment and a $250,000 fine.

United States Attorney Peter F. Neronha announced Hernandez‘s guilty plea to seven counts of bank fraud, four counts of wire fraud, and two counts of conspiracy. No plea agreement was filed in this case.

The cases are being prosecuted by Assistant U.S. Attorney Luis M. Matos.

The matters were investigated by the Federal Bureau of Investigation, U.S. Department of Housing and Urban Development Office of Inspector General, and Internal Revenue Service – Criminal Investigation.

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Allison Tussey

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