Florida Prosecution of Mortgage Frauds by Criminal Lawyer Ralph Behr: Part 3

Continuing in Attorney Behr’s mortgage fraud prosecutions series:

18 U.S.C. § 1010 Department of Housing and Urban Development and Federal Housing Administration transactions
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18 U.S.C. § 1006 Federal credit institution entries, reports and transactions
In United States v. Mclean, 131 Fed.Appx. 34 (4th Cir. 2005), Mclean was convicted under 18 U.S.C. §1010 for making material misrepresentations to “…any person, partnership, association, or corporation…” in order to obtain “…any loan or advance of credit…” with the intention of such loan or advance of credit to be “…offered to or accepted by the Department of Housing and Urban Development…” for mortgage loans insured by the department.17 The defendant was also convicted under 18 U.S.C. §1006 for material misrepresentations made to HUD and the Federal Housing Administration (FHA) because he was “…an officer, agent or employee of or connected in any capacity with…” a federal credit institution.18
McLean’s mortgage company was a qualified FHA lender and “…had the authority to approve mortgage loans for federal FHA insurance. 19 “An FHA-insured mortgage loan, in turn, is ‘readily saleable’ on the secondary mortgage market.”20 McLean’s company also obtained the proper authorization to be a Fannie Mae lender giving the company the power to “…originate a mortgage loan with the borrower and then Fannie Mae would immediately buy the mortgage on the secondary market without doing its own underwriting evaluation.”21
McLean’s company formed a subsidiary company for the purpose of building modular homes which was financed by the parent mortgage company. Efforts were made to collect the proper funding for the construction of the modular homes through construction mortgage loan notes allegedly signed by investors and officers of the parent mortgage company.22 “None of the individuals signing these documents ever acquired or possessed any ownership interest in the properties listed on the notes.”23
“Eventually, Fannie Mae detected irregularities in FBMC’s underwriting practices and conducted an audit of the loans it had purchased.”24 Upon visual inspection of the properties by Fannie Mae “…revealed that the many of the lots were either vacant or contained a partially completed house.”25 Furthermore, a portion of the lots secured with mortgage loans previously purchased by Fannie Mae were up for sale.26 McLean believed “…Fannie Mae would purchase construction loans, which disburse funds in piecemeal fashion as each new phase of construction begins.”27 “Fannie Mae, however, does not purchase construction loans, which FBMC was not authorized to sell.”28