Loan Officer Pleads Guilty and Appraiser Identity Theft Charged

Rachel Dollar —  September 25, 2015 — 3 Comments

Franchesco Franco, 34, a former mortgage loan originator, Providence, Rhode Island, pleaded guilty in federal court to conspiracy to commit bank fraud for his participation with a local real estate attorney and others in a scheme to defraud Flagstar Bank, by filing a fraudulent mortgage loan application and supporting documentation in the name of a person known to him who had recently died, in order to secure a loan in the amount of $157,102 for the purchase of a residence at 63 Wendell Street, Providence, Rhode Island.

According to court documents, after the mortgage was issued, Franco filed fraudulent documents in the deceased person’s name in order to have his own name added to the deed for the property. Loan payments were never made to Flagstar Bank, an FHA-insured lender, by Franco or anyone else. As a result, the U.S. Department of Housing and Urban Development (HUD) paid an insurance claim to Flagstar Bank for the unpaid balance of the loan in the amount of $165,062. According to court documents, a corporation formed by the real estate attorney, an alleged co-conspirator in this matter, later purchased the note for $35,000.

In a separate matter discovered during the investigation into mortgage fraud in Rhode Island which resulted in the charges being brought against Franco, it is alleged that Dylan T. Kelly, 40, whose real estate appraiser’s license expired in September 2008, has continued to conduct and issue real estate appraisals using the identity, license and insurance certificate of licensed appraisers without the licensed appraisers’ permission or knowledge. Kelly has been charged in federal court with conspiracy to commit bank fraud, false statements in loan applications and aggravated identity theft in connection with the appraiser identity theft.

Appearing before U.S. District Court Judge John J. McConnell, Jr., Franco admitted to the court that beginning in January 2010, he participated in a conspiracy in which he made false statements on a mortgage loan application and provided false documentation, including fraudulent tax returns, pay stubs, verification letters and bank statements, all in the name of a deceased person known to Franco, in order to secure a federally insured mortgage from Flagstar Bank in the amount of $157,102. Franco also provided copies of the deceased person’s social security card and driver’s license.

According to court documents, as part of the scheme, on April 15, 2010, more than three weeks after the death of the individual known to Franco, Franco filed a tax return for tax year 2009 in the deceased person’s name. In the filing, Franco provided the IRS his own personal bank account number, purporting that the bank account number belonged to the deceased individual and was to be used for direct deposit of a tax refund. The tax form was later provided by Franco to Flagstar Bank as supporting documentation for the mortgage loan application in the deceased person’s name.

According to court documents, in September 2010, one month after Flagstar issued the mortgage and a closing took place for purchase of the Wendell Street property, Franco forged or caused to be forged documents and the deceased person’s signature in order to have his name added to the deed for the property. No payments were ever made on the mortgage loan by Franco or anyone else. As a result, in July 2011, HUD paid an insurance claim to Flagstar Bank in the amount $165,062, which represented the balance of the mortgage loan. In March 2012, the real estate attorney allegedly involved in the conspiracy bought the note, which was in the deceased person’s name, for $35,000.

In a separate matter discovered by federal and state law enforcement and prosecutors from the U.S. Attorney’s Office during the ongoing investigation into mortgage fraud in Rhode Island, it is alleged that on at least four occasions Dylan Kelly, whose real estate appraiser’s license expired in September 2008, continued to conduct and issue real estate appraisals using the identity, license and insurance certificate of licensed appraisers without the licensed appraisers’ permission or knowledge. It is alleged that between February 19, 2014, and December 2, 2014, Kelley fabricated and submitted appraisals in support of mortgage loans being sought on at least four properties in Providence, Rhode Island and Pawtucket, Rhode Island.

Franchesco Franco’s guilty plea and charges brought against Dylan T. Kelly were announced by United States Attorney Peter F. Neronha; Christina D. Scaringi, Special Agent in Charge of the Northeast Region of the U.S. Department of Housing and Urban Development Office of Inspector General; Ted A. Arruda, Resident Agent in Charge of the Providence Office of the U.S. Secret Service; and Colonel Steven G. O’Donnell, Superintendent of the Rhode Island State Police.

The matter, which is being investigated by the U.S. Department of Housing and Urban Development Office of Inspector General, U.S. Secret Service, Rhode Island State Police and the United States Attorney’s Office, is being prosecuted by Assistant U.S. Attorney’s Sandra R. Hebert and William J. Ferland.

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Rachel Dollar

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3 responses to Loan Officer Pleads Guilty and Appraiser Identity Theft Charged

  1. I absolutely refuse to include the E&O binder page in any report, for any client, at any time. I also DO NOT put a full size image of my appraiser license in any report. My attitude is if they don’t like that business policy, go find some other less-aware appraiZer to do your report.

  2. So tell me again how you see no problem when an AMC insists you include a copy of your E&O Declarations page in EVERY appraisal report…..

    • You’re right. I see plenty wrong with it because then, the person committing fraud could potentially have a copy of my E&O too. AMC’s get a fresh copy every year, it does not need to be in the hands of every person who may see my report. I hope more people catch on and refuse to put it in the report.

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