An Ohio man agreed to plead guilty in connection with a Cincinnati, Ohio, mortgage fraud scheme that caused losses of almost $873,000, according to legal documents in the case.
Clarence Harris of Cincinnati, Ohio, agreed to plead guilty to conspiracy to commit bank fraud, wire fraud, mail fraud and filing a false income-tax return in a plea agreement filed Feb. 13.
According to court documents, Harris caused losses of $872,910 to financial and lending institutions in connection with his role in the alleged flipping scheme, which, according to media reports, has already resulted in more than 24 guilty pleas.
The conspiracy charge carries a maximum penalty of 30 years in prison and a $1 million fine, while the tax-related charge carries a maximum penalty of three years in prison and a $100,000 fine.
According to the plea agreement, in the alleged flipping scheme, a person would purchase a piece of real estate at a low value — for example, $20,000. Then, a buyer would be recruited, usually someone who could not otherwise afford to purchase real estate or an individual interested in properties as an investor, the plea agreement said.
After finding the buyer, one of the co-conspirators would create false documents, including pay stubs, W-2 forms, bank statements and employment verifications, the plea agreement alleged. The co-conspirators would then obtain a falsely inflated appraisal for the property, the document said.
The co-conspirators would submit the false loan package to the lender in order to obtain a highly inflated loan (for example, $85,000 for the property that was originally purchased months before for $20,000), the court papers said.
Harris acted as a loan originator and a recruiter for many of the flipped properties, the document said. He allegedly recruited buyers to purchase properties from others at artificially inflated values and, the document said, was aware that one of his co-conspirators, rather than the buyer, brought the down payment to the closing.
Harris also knew that buyers often received undisclosed kickbacks outside of the closing, the court papers allege. As owner of Check First Mortgage, Harris prepared loan applications that he knew were false, overstating borrowers’ income and assets, and which were supported by inflated appraisals, the documents accuse.
A hearing on the plea agreement is scheduled for Feb. 28, 2006.
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