U.S. District Judge J. Frederick Motz sentenced James Dan, age 46, of Annapolis, Maryland, today to a year and a day in prison followed by three years of supervised release for conspiracy to commit wire fraud in connection with a mortgage fraud scheme which promised to help homeowners facing foreclosure keep their homes, but left them homeless and with no equity. Judge Motz also ordered that Dan pay restitution but withheld determination of the amount until receiving further submissions from counsel.
The sentence was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; and Special Agent in Charge Ken Taylor of the Housing and Urban Development Office of Inspector General – Office of Investigations.
James Dan met James Fox in Annapolis when both were loan officers for a mortgage lender. Although Dan left the mortgage company in 2005, Dan and Fox stayed in contact with each other.
According to their plea agreements, beginning in 2006, Fox began to identify prospective borrowers who owned and had equity in their homes, but who could not afford their mortgage payments and were at risk of losing their homes because they were either in foreclosure, bankruptcy or financial distress. Fox, and sometimes Fox and Dan, told potential victims that they could “rescue” them and save their houses. The promises involved transferring the home to Dan or Fox, who would obtain a new mortgage loan. Dan and Fox promised to make the payments on the new mortgage loan for six months or a year, during which time the individual would “repair” their credit, refinance the property and reacquire it. During this six month or one year period, the individual was to continue living in the house.
In order to obtain the mortgage loans in their names, Dan and Fox made materially false and fraudulent loan applications including falsification of their intent to occupy the property, annual income, savings, other properties owned, and source of the borrower’s funds for closing. Fox was typically the loan officer for Dan’s loans and was aware of Dan’s material misrepresentations.
From April 20, 2006 through July 5, 2007, Dan and Fox transferred eight properties from financially distressed homeowners to themselves or straw purchasers they recruited. The properties were located in Waldorf, Capitol Heights, Baltimore, Silver Spring, Pasadena and Hagerstown, Maryland, as well as Glen Rock, Pennsylvania and Chesterfield, Virginia. The settlement statements (sometimes called HUD-1s) used at the settlements were false. In each instance, Dan, Fox, or the straw purchaser was supposed to produce the buyer’s funds to close at settlement from their own resources. These funds actually came from the seller’s proceeds, or from money borrowed from others, so that Fox invested no funds of his own in any transaction. Although Dan and Fox were the buyers of the properties, they obtained proceeds from the equity in the properties by making material false representations to financial institutions making the loans. In addition, the sellers paid over to Dan and Fox, or one of their companies, monies that were identified on the HUD-1 as the sellers’ proceeds of the property sales. Dan and Fox shared some of these proceeds with the sellers either directly or by paying off sellers’ debts, but put the remainder in their own bank accounts. Although Dan and Fox made some mortgage payments on each of the properties, they eventually defaulted on the mortgage loans, and all eight properties went into default. None of the victims is in title of their homes. Three victims are trying to regain title to their homes through civil law suits. Five victims have lost their homes.
Dan, as a mortgage loan officer, was aware of the implications of the sale: that the seller who deeded away his or her home lost control of their home; that the person who was facing foreclosure today would not likely be able to afford a mortgage loan at a higher amount a year from now; that the individual who could not qualify for re-financing today would not qualify for a mortgage loan in a year and could not re-purchase their home; that Dan and his associate could not likely afford to make the mortgage payments for more than six months or a year and might default on the new mortgage; and that the house had equity which Dan and his associate were taking out at settlement for their own uses.
Judge Motz sentenced James William Fox II, age 40, of Crofton, Maryland, to 27 months in prison on January 28, 2011 for his participation in the conspiracy and ordered that Fox pay restitution in an amount yet to be determined.
The Maryland Mortgage Fraud Task Force was established to unify the agencies that regulate and investigate mortgage fraud and promote the early detection, identification, prevention, and prosecution of mortgage fraud schemes. This case, as well as other cases brought by members of the Task Force, demonstrates the commitment of law enforcement agencies to protect consumers from fraud and promote the integrity of the credit markets. Information about mortgage fraud prosecutions is available http://www.justice.gov/usao/md/Mortgage-Fraud/index.html.
This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
United States Attorney Rod J. Rosenstein thanked the FBI and HUD, Office of Inspector General for their work in this investigation and recognized the Maryland Crime Victims’ Resource Center, Inc. for their assistance to victims in this case.
United States Attorney Rod J. Rosenstein commended Assistant U.S. Attorney Joyce K. McDonald, who prosecuted the case.