Former mortgage company president indicted in multimillion-dollar fraud

by Ryan Smith11 Jun 2020

A former mortgage company president has been charged with 24 counts of financial fraud in a multimillion-dollar mortgage swindle, according to the Justice Department.

Ronald J. McCord, former president of Oklahoma-based First Mortgage Company (FMC), has been accused of scamming Fannie Mae, two Oklahoma banks, and others, according to Timothy J. Downing, US attorney for the Western District of Oklahoma. McCord faces charges including bank fraud, money laundering, and making a false statement to a financial institution.

According to an indictment handed down by a federal grand jury, McCord engaged in a broad range of fraudulent conduct over the course of approximately three years. He is charged with defrauding Spirit Bank and Citizens Bank, as well as their respective mortgage subsidiaries, American Southwest Mortgage Corporation (Mortgage Corp.) and American Southwest Funding Corporation (Funding Corp.). According to the indictment, an independent audit discovered that McCord had sold more than $14.1 million in Spirit/Mortgage Corp. and Citizens/Funding Corp. loans “out of trust” by failing to repay the Spirit/Mortgage Corp. when certain loans initiated by the bank were refinanced or otherwise paid off.

This discovery prompted further scrutiny into McCord and FMC. An internal audit allegedly found that McCord had misappropriated additional Spirit/Mortgage Corp. and Citizens/Funding Corp. loans by using warehouse lines of credit with the banks – selling loans to Fannie Mae and then resubmitting the loan documents to Spirit or Citizens to receive additional money from his credit lines with the banks; using FMC’s warehouse lines of credit with the banks to refinance the resulting loans without repaying the banks the originally loaned funds; using those lines of credit to fund mortgages to borrowers but never repaying the banks; and using warehouse lines of credit to “double fund” loans by obtaining funds from both banks to fund the same loan.

McCord’s actions allegedly involved Spirt/Mortgage Corp. and Citizens/Funding Corp. in loans totaling approximately $40 million, in addition to the $14.1 million in loans McCord sold out of trust. 

Upon discovering McCord’s conduct, both banks terminated future warehouse lending to FMC and instituted requirements that McCord assign FMC-funded mortgages to Spirit/Mortgage Corp. and Citizens/Funding Corp., to ensure that the title companies handling those mortgages sent payoffs directly to the bank. Whole McCord filed the required assignments, his employees allegedly contacted the title companies and had payments directed back to FMC. McCord allegedly continued to collect loan payoffs without paying the banks. He also allegedly signed releases on those mortgages after receiving the payoffs, subjecting the homeowners to potential foreclosure if Spirit/Mortgage Corp. or Citizens/Funding Corp., which held the titles, tried to collect payments on the mortgages.

The indictment also alleged that in 2017, McCord serviced about 12,000 loans, worth approximately $1.8 billion, for Fannie Mae, and defrauded the GSE by diverting escrow money intended to pay homeowners’ taxes, principal and interest to cover FMC’s operating expenses. McCord allegedly bounced checks to more than 60 taxing authorities, and borrowers throughout the Oklahoma City area missed making their tax payments. McCord is alleged to have laundered his ill-gotten escrow money by writing himself checks, pay more than half the purchase price of his son’s $900,000 home, and build a custom vacation home in Colorado.

If convicted, McCord faces up to 30 years in prison and a fine of up to $1 million for each count of bank fraud and making a false statement to a financial institution. He faces up to 10 years in prison and a fine of up to $250,000 on each count of money laundering. The Justice Department is also seeking forfeiture from McCord in the amount of the proceeds of the alleged fraud and in the amount of the property involved in the scams.