Defendants Mary Armstrong, Teresa Rose, William Fountain, John Allen, Justin Mensen and Audrey Yeboah all pleaded guilty to their roles in the scheme, which involved recruiting straw buyers to purchase property.
Prosecutors say that Armstrong, an unlicensed mortgage broker who orchestrated the scam, recruited “real estate investors” through ads in the Los Angeles Times and other media, offering the “investors” the chance to purchase homes with no money down and promising to make payments on their behalf using income from rental properties.
“In reality, these so-called investors were nothing more than straw buyers who were promised $10,000 for each property purchased as part of the scheme,” a release from U.S. Attorney Laura Duffy’s office stated. “Rose helped secure mortgages on the properties by falsifying loan applications for the straw buyers.”
Rose, a real estate agent from Ramona, Calif., acted as agent for both buyer and seller in a number of transactions, convincing sellers to inflate the purchase price of various properties by $100,000 or more, according to the U.S. Attorney’s Office. The inflated prices were allegedly to fund improvements to the properties; however, no improvements were made. Instead, the money was kicked back into accounts controlled by the conspirators.
“In this way, the conspirators pocketed nearly $15 million in kickbacks, made few if any mortgage payments, and allowed nearly all of the properties to fall swiftly into foreclosure,” the U.S. Attorney’s Office stated.
In all, Armstrong and her co-conspirators obtained about $100 million in mortgage loans, causing losses between $7 million and $20 million to the lenders and Fannie Mae and Freddie Mac, according to prosecutors.
Armstrong has been sentenced to 100 months in prison. Fountain and Rose were sentenced to 42 months and 15 months, respectively, while Allen received a 12-month sentence. Mensen, a straw buyer in the scheme, and Yeboah, a tax preparer who generated fake paperwork, both received probation along with home detention or house arrest.
Six people have pleaded guilty charges stemming from their participation in a $100 million mortgage scam, according to the U.S. attorney for California’s Southern District.