NY Feds Indict Four In Alleged Short Sale, Flipping Fraud Targeting Homeowners In Foreclosure; Unwitting Straw Buyers Left Holding The Bag

From the Office of the U.S. Attorney (Southern District - New York):

• LEV L. DASSIN, the Acting United States Attorney for the Southern District of New York, [and other officials] announced the filing yesterday of a six-count Indictment against LAVETTE M. BILLS, KIRK LACEY, OMAR HENRY, and PETER CHEVERE, charging them with perpetrating a mortgage fraud scheme involving loans totaling over $3 million on at least six different residences.(1)

• BILLS targeted homeowners who had fallen behind on their mortgage payments and whose homes were facing foreclosure by running radio advertisements and appearing on radio programs representing that she was a foreclosure specialist and had the ability to keep a home from going into foreclosure. BILLS and LACEY were then able to convince some of these homeowners to sell or transfer their homes to BILLS or to a company BILLS controlled, NNI, LLC. This was usually done via a "short sale," in which the lender agreed to sell the property for less than the balance owed on the loan and to discharge the remainder of the loan.

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• However, without the knowledge of either the lenders who approved the short sales, or of the selling homeowners, BILLS and LACEY or their co-conspirators "flipped" the properties to third-party straw buyers at a higher price, usually on the same day or within a short period of time. The sales price in the second transactions–the "flips" -- was often significantly higher–typically by $150,000 or more -- than the short sale price, yet the homeowners typically received little or no money from the sale of their homes. To accomplish this, BILLS and LACEY deceived both the straw buyers and the lenders who were providing the mortgages to finance the purchases.

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• As a result of their fraud, the defendants profited from their "flips" of the properties; the homeowners lost title to their homes; the straw buyers became liable on hundreds of thousands of dollars they were unable to repay; and the lenders suffered losses from those loans, which eventually went into default.

For the entire press release, see FOUR INDICTED IN $3 MILLION MORTGAGE FRAUD AND FORECLOSURE RESCUE SCHEME.

For the Indictment, see U.S. v. Bills, et al.

(1) BILLS, 36, of Briarcliff Manor, New York, and LACEY, 36, of Pembroke Pines, Florida, were previously charged in a criminal Complaint filed in Manhattan federal court on March 17, 2009.

(2) In at least one case, involving a residence on Tinton Avenue in the Bronx, BILLS convinced the homeowner to place BILLS' name on the deed to the house and to "gift" the equity in the house to BILLS, in return for BILLS' fraudulent promise to transfer the house back to a relative of the homeowner.