Loan Officer Sentenced for Foreclosure Rescue Fraud

Allison Tussey —  January 31, 2011 — 1 Comment

James William Fox II, 40, Crofton, Maryland, was sentenced by U.S. District Judge J. Frederick Motz to 27 months in prison, followed by three years of supervised release, for conspiracy to commit wire fraud in connection with a mortgage fraud scheme which he promised to help homeowners facing foreclosure keep their homes, but left them with no equity and no longer holding the title to their properties. At the sentencing hearing, Judge Motz also ordered that Fox pay restitution in the full mount of the loss, which the government contends is between $1 million and $2.4 million.

According to Fox‘s plea agreement, he met James Hooper Dan, 45, Annapolis, Maryland, when both were loan officers at a mortgage brokerage in Annapolis. Beginning in 2006, Fox began to identify prospective borrowers who owned and had equity in their homes, but who could not afford their mortgage payments and were at risk of losing their homes because they were either in foreclosure, bankruptcy or financial distress. Fox, and sometimes Fox and Dan, told potential victims that they could “rescue” them and save their houses. The promises involved transferring the home to Fox or Dan, who would obtain a new mortgage loan. Fox and Dan promised to make the payments on the new mortgage loan for six months or a year, during which time the individual would “repair” their credit, refinance the property and reacquire it. During this six month or one-year period, the individual was to continue living in the house.

In order to obtain the mortgage loans in their names, Fox and Dan made materially false and fraudulent loan applications including falsification of their intent to occupy the property, annual income, savings, other properties owned, and source of the borrower’s funds for closing. Fox was typically the loan officer for Dan‘s loans and was aware of Dan‘s material misrepresentations.

According to the plea agreement, from April 20, 2006 through July 5, 2007, Fox and Dan transferred eight properties from financially distressed homeowners to themselves or straw purchasers they recruited. The properties were located in Waldorf, Capitol Heights, Baltimore, Silver Spring, Pasadena and Hagerstown, Maryland, as well as Glen Rock, Pennsylvania and Chesterfield, Virginia. The settlement statements (sometimes called HUD-1s) used at the settlements were false. In each instance, Fox, Dan, or the straw purchaser was supposed to produce the buyer’s funds to close at settlement from their own resources. These funds actually came from the seller’s proceeds, or from money borrowed from others, so that Fox invested no funds of his own in any transaction. Although Fox and Dan were the buyers of the properties, they obtained proceeds from the equity in the properties by making material false representations to financial institutions making the loans. In addition, the sellers paid over to Fox and Dan, or one of their companies, monies that were identified on the HUD-1 as the sellers’ proceeds of the property sales. Fox and Dan shared some of these proceeds with the sellers either directly or by paying off sellers’ debts, but put the remainder in their own bank accounts. Although Fox and Dan made some mortgage payments on each of the properties, they eventually defaulted on the mortgage loans, and all eight properties went into default. The victims do not have title of their homes.

Dan previously pleaded guilty to the same charge and is scheduled to be sentenced on February 25, 2011 at 10:30 a.m.

The sentence was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; and Special Agent in Charge Ken Taylor, Jr. of the Housing and Urban Development Office of Inspector General – Office of Investigations.

The Maryland Mortgage Fraud Task Force was established to unify the agencies that regulate and investigate mortgage fraud and promote the early detection, identification, prevention and prosecution of mortgage fraud schemes. This case, as well as other cases brought by members of the Task Force, demonstrates the commitment of law enforcement agencies to protect consumers from fraud and promote the integrity of the credit markets. Information about mortgage fraud prosecutions is available http://www.justice.gov/usao/md/Mortgage-Fraud/index.html.

United States Attorney Rod J. Rosenstein thanked the Maryland Crime Victims’ Resource Center, Inc. for their assistance to victims in this case.

United States Attorney Rod J. Rosenstein thanked the FBI and HUD-OIG, Office of Investigations for their work in this investigation and commended Assistant U.S. Attorney Joyce K. McDonald, who prosecuted the case.

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Allison Tussey

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One response to Loan Officer Sentenced for Foreclosure Rescue Fraud

  1. Were the former homeowners charged as well? Seems to me they were part of the scheme to defraud the system as well to hold on to their homes at any cost. It’s suspect for these homeowners to claim they are victims, with so many of the scams already having made the news…

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