Edward Arnold Septon, 59, Naples, Florida, was sentenced to 70 months in prison and five years supervised release for his involvement in a fraudulent mortgage brokering business that resulted in a loss to area banks of more than $2.3 million.. Septon was the founder and leader of First Rate Mortgage Group, a mortgage brokerage business known to be extensively engaged in mortgage fraud.

On May 12, 2008, Christopher Adam Horton, 34, Minnetonka, Minnestoa, was sentenced to 24 months and three years of supervised release. Horton was a loan officer and supervisor at First Rate Mortgage.

Both were sentenced on one count of conspiracy to commit mail fraud and bank fraud, and were also ordered to pay more than $2.3 million in joint restitution with the other defendants. Septon was also sentenced on one count of bank fraud.

As previously reported by Mortgage Fraud Blog, the co-defendants in the case are: Sean Brian Leaf, 35, Woodbury, Minnesota, who was sentenced on May 9, 2008 to 18 months in prison and three years probation; Joddilee Margaret Lindberg, 50, Minneapolis, who was also sentenced on May 9, received four years probation and eight months of community confinement with work release; and Micah Daniel Thormodsgaard, 25, St. Paul, who was sentenced on April 3, 2008, received three years probation. A sentencing date for the last defendant, Christopher Erik Septon, has not been scheduled.

All six defendants pleaded guilty last fall to the single conspiracy count, and Edward Septon also pleaded guilty to one count of bank fraud on Sept. 21, 2007. All six were charged on Aug. 8, 2007.

According to their respective plea agreements, they admitted that between 2000 and August 2004 they conspired to use the U.S. Mail to execute a scheme to defraud financial institutions and private mortgage lenders of funds. Specifically, through their business, First Rate Mortgage Group, they represented that for a fee, they could help people obtain financing for the purchase of real estate. To do so, they mailed false and fraudulent loan applications to banks and mortgage lending companies, which concealed that First Rate Mortgage had loaned the money for the down payment to the borrower. The applications also inflated the borrower’s income and assets, falsely described the borrower’s employment and contained forged signatures, falsified pay stubs, gift letters, bank statements and bank notes.

In January 2004, the six caused false loan applications to be submitted to Washington Mutual Bank in the amount of $1,330,000, and Associated Bank in the amount of $378,555 on behalf of a borrower purchasing property in Wayzata, Minnesota. The applications falsely stated the source of the down payment, which had been loaned by the conspirators, as well as other falsified information.