A year after breaking up a Colorado mortgage fraud ring that falsified documents to allow noncitizens buy more than 300 homes using federally insured loans, authorities have begun rounding up hundreds of buyers who allegedly participated in the scheme.
In the last two weeks, local, state and federal law enforcement authorities have arrested 15 people and charged them with filing false documents with lenders, including fake “green cards” issued to legal residents and forged Social Security cards. If convicted, those arrested also face deportation, said Jefferson County District Attorney Scott Storey.
Last year, Storey’s office indicted nine real estate professionals accused of recruiting illegal immigrants to buy 191 homes with mortgages guaranteed by the Federal Housing Administration. Three real estate agents and six loan officers were charged in three indictments.
“This was unique, in that the transaction started with the real estate broker,” Storey said. “This was the real estate brokers seeing a market for this, and recruiting illegals by saying we can put you into a house, and falsifying documents.”
To qualify buyers for FHA-backed loans, the mortgage fraud ring falsified not only their identities, but also their incomes, prosecutors said.
“You had to have the loan officer involved as well,” Storey said. “Frankly, you’d think the underwriters would verify, but that did not happen. That would be my advice — the underwriters need to do their due diligence.”
The fraudulently financed homes were priced in the $200,000 to $250,000 range, Storey said, and about 38 percent have been foreclosed on or are in the foreclosure process. According to a U.S. Department of Housing and Urban Development report on the case this summer, the scheme involved more than 300 properties and cost HUD $2.35 million.
All but one of the nine defendants indicted by the Jefferson County District Attorney last year have since been convicted and sentenced (a jury trial for the remaining defendant is scheduled for January). But Storey said an additional 284 people who participated in the scheme as buyers may be in the U.S. illegally. Local authorities didn’t have the resources to indict several hundred people, so they contacted federal authorities for help, Storey said.
Agencies that assisted the Jefferson County Sheriff’s Department and District Attorney’s Office in the latest round of arrests included the Colorado Bureau of Investigation and federal agents from HUD, Immigration and Customs Enforcement, the Social Security Administration, the Postal Inspection Service and the U.S. State Department.
The breakup of the mortgage fraud ring has been touted as an example of cooperation between local, state and federal agencies. But the real estate broker who first brought the fraud ring to the attention of authorities told Inman News that it operated unimpeded for two years after he tipped HUD investigators.
Jim Weichselbaum, owner of RE/MAX 100 Realtors in Lakewood, said it was not until he took his suspicions about three of his contract employees to the Colorado Bureau of Investigation that the fraud ring was shut down. The HUD Inspector General only had three investigators to work the entire Rocky Mountain region, Weichselbaum said.
“They (HUD) hadn’t done anything for about two years, until I brought in CBI,” he said. Storey corroborated Weichselbaum’s account.
“My understanding is that he contacted HUD … and nothing was happening,” Storey said. “The CBI is located in the same building (as RE/MAX 100 Realtors), so he contacted them, and they (CBI) brought the case to us,” Storey said.
Weichselbaum said he believes authorities are overwhelmed by mortgage fraud, and that there is a reluctance to pursue cases involving illegal immigrants because of the potential impact to the economy. That the scheme went on for so long only encouraged more people to get involved, he said.
“I think part of it was that HUD had started an investigation, and nothing happened for such a long time, people who were thinking about it said let’s go ahead and do it,” Weichselbaum said. “It’s no different than a stretch of highway where the posted speed limit is 65 mph and everybody does 100 and nobody’s been arrested in 10 years.”
A HUD spokesman said that mortgage fraud investigations can be long and involved.
“I haven’t seen a case yet we’ve been able to close overnight,” said HUD Deputy Assistant Secretary Jereon Brown. “If you look at the size of the net, and the folks that were caught up in this one, it’s not an overnight case.”
Storey said the federal officials his office is now working with — including HUD — have “been very supportive in recognizing the problem” and forming the task force that is now rounding up noncitizens who were recruited as buyers. He called the task force “a good example of the feds working with the state.”
A broker for 23 years, Weichselbaum said mortgage fraud is “not a sexy crime, and it takes a lot of work to document the files.” When perpetrators are prosecuted and convicted, “they get a slap on the wrist.”
Although six of the eight defendants prosecuted by the Jefferson County District Attorney’s Office were sentenced to prison or jail, only two may end up serving time. Others received suspended sentences, meaning they can avoid prison if they complete their probation.
According to the Jefferson County District Attorney’s office, Realtors Jose Alfredo Ramirez, 29; Patricia Soehnge, 37; and Ricardo Medina, 33, were convicted or pleaded guilty for their roles in the scheme, as did loan officers Ludibeth Salazar, 28; Perla Alvarado, 26; Lucinda Loma, 36; Nancy Rios, 41; and Martha Pereda, 31. A jury is scheduled to hear the case of loan officer Kenya Marina Hedges in January.
According to HUD, Ramirez worked for William E. Mendez Team Inc., RE/MAX 100 Inc., and Mendez has also pleaded guilty to one count of wire fraud.