Two More Charged in Cincinnati Federal Flipping Investigation

A loan originator and a loan processor have agreed to plead guilty after being charged by information in connection with the ongoing investigation into mortgage fraud in the Greater Cincinnati area of Ohio.

Ike Bronson, a former loan originator at Seven Hills Financial mortgage brokerage, was charged by information and has agreed to plead guilty to bank fraud, conspiracy and filing a false tax return. A hearing for acceptance of his plea has been set for January 12, 2006.

The information alleges that, on or about January 31, 2003, Kevin Vallandignham purchased property at 2540 Queen City, Cincinnati, Ohio for $85,000. Bronson prepared Vallandignham’s loan application that indicated the source of down payment was the borrower’s checking/savings account. According to the HUD-1 settlement statement Vallandignham brought a down payment of $6,695.70 to the closing. In fact, according to the information, Bronson brought the down payment and signed the loan application as loan originator knowing that it was false. Also submitted to the lender was a false appraisal supporting the inflated sales price of $85,000.

In his plea agreement, Bronson admitted that he engaged in a flipping scheme to defraud lenders that operated between January 1, 2002 and February 14, 2005 by knowingly submitting false documents in support of loan applications to lenders as well as false HUD forms. Bronson furthered the scheme by acting as a loan originator and recruiter. He recruited buyers to purchase properties at inflated values and was aware the buyer did not bring the down payment to the closing. He was also aware that the buyer often received a non-disclosed ‘kickback’ out of the closing. As a loan originator at Seven Hills Financial, Bronson prepared loan applications that overstated borrower’s income and assets. He also knew that the appraisals grossly overstated the property values in order to generate higher loan amounts.

The plea agreement references the May 21, 2003 purchase by Cory Owens of 138 Kinsey Street, Cincinnati, Ohio for $85,000. Bronson prepared the loan application which indicated the source of the down payment was Owens‘ “cash on hand.” Although the HUD indicated that Owens brought a down payment of $4,732.57 to the closing, it was actually brought by Bronson, according to the plea agreement. The appraisal was also inflated.

The plea agreement also states that Bronson willfully filed a false tax return for 203. During that year, according to the plea agreement, he received payoffs from fraudulent loan proceeds made payable to his shell company, LCI Financial.

According to the plea agreement, the United States and Bronson agreed that he caused an actual or intended loss to various financial and lending institutions of $728,865 and failed to report $131,217 of income on his tax return, thereby understating his tax liability by $40,440.

Bryan Young, a loan processor who, according to his plea agreement, processed loans for Cathy Yocum, was also charged by information and has agreed to plead guilty to bank fraud and conspiracy. A hearing for formal entry of the plea is set for January 12, 2005.

In his plea agreement Young admitted that he engaged in a flipping scheme to defraud lenders that operated between May 1, 2001 and December 31, 2001 by knowingly submitting false documents in support of loan applications to lenders as well as false HUD forms. Young furthered the scheme by servicing as the loan processor for some of the flipped properties, according to the plea. During the course of his work, according to the plea agreement, he conspired with others to submit false loan packages to various financial institutions. He knew that borrowers were not bringing down payments to closing but rather that co-conspirators were bringing the down payments. He admitted to processing approximately 15 to 20 loans that contained false documents including false loan applications. Young was paid $300 to $350 by his employer for each loan he processed and also received monthly cash payments ‘under the table’ from Cathy Yocum for whom he processed the fraudulent loans, according to the plea agreement. Click here to read the Mortgage Fraud Blog article on the charges against Yocum.

The information refers to Christian Larson’s August 31, 2001 purchase of 114 N. 10th Street, Hamilton, Ohio from Ronald Trester for $85,000. Click to review the Mortgage Fraud Blog articles on Ronald Trester’s guilty plea and sentencing. Young acted as the loan processor for the loan. The HUD-1 reflects the borrower brought $9,744.28 to the closing supported by a loan application that reflected a bank account balance of $39,000 as source of the down payment. In reality, according to the information, the borrower did not have those funds and did not provide them to make the down payment.

According to the plea agreement, the United States and Young agreed that he caused an actual or intended loss to various financial and lending institutions of $255,370.

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