Blame laid on broker as couple convicted of fraud gets new trial

by Ryan Smith17 Sep 2013

A Wisconsin couple convicted in 2011 of mortgage fraud will get a new trial after seeing their conviction overturned in a federal court, which pointed the finger of blame squarely at their broker.

Lacey Phillips and Erin Hall were convicted after a trial in U.S. District Court in Madison, Wis., sentenced to 60 days in jail, and ordered to repay – along with their broker -- $90,000 in restitution, according to the Wisconsin State Journal.

The case stemmed from a loan Phillips and Hall got in 2006 in order to purchase a $200,000 home. Prosecutors in the case said that Phillips, a hairdresser, and Hall, a barber, submitted fraudulent information on the loan application. However, the 7th Circuit Court of Appeals sent the case back to District Court Judge Barbara Crabb for retrial, ruling that Crabb had improperly prevented the couple from testifying about the role played by their broker, Brian Bowling. 

Bowling was convicted of submitting fraudulent information on $1.7 million in home loans, resulting in nearly half a million dollars in losses. Bowling’s original 51-month sentence was cut to 38 months after he agreed to testify against Phillips, Hall and other borrowers, the Journal reported.

Bowling helped the couple secure the loan through the now-defunct Fremont Investment and Loan, an institution the majority ruling of the 7th Circuit called “a federally insured bank of dubious ethics.” Phillips was the sole applicant for the mortgage, and the application gave her a phony job title – sales manager at a satellite TV business. The application also stated Phillips’ income as $90,000 per year – twice what she and Hall together were earning at the time, according to the Journal.
Phillips and Hall, however, maintained that they never saw the application and were unaware that Bowling had inflated their income or lied about Phillips’ job. The majority on the appeals court found the story credible, calling the couple “financial naïfs” who were “hapless victims of Bowling.”

The majority also ruled that the couple could not be convicted of misleading Fremont Investment and Loan because the bank didn’t care what was on the loan application in the first place, the Journal reported.

“There was evidence ... that the bank didn’t give a fig about the couple’s ability to repay the loan,” the ruling stated.“It planned to sell the loan, which would then be folded with many other loans into a mortgage-backed security that would be sliced and the slices sold around the world.”


Should CFPB have more supervision over credit agencies?