Arizona Mortgage Broker Cops Plea In Loan Fraud Conspiracy; Will "Sing" To Feds In Prosecution Of Alleged Cohorts; Foreclosing Lenders Take $1M Hit

From the Office of the U.S. Attorney (Phoenix, Arizona):

• Jake David Abegg Whitman, 33, of Mesa, Ariz., pleaded guilty on August 18, 2009, to one count of Conspiracy to Commit Bank Fraud and seven counts of Bank Fraud. Whitman played a leadership role in the underlying conspiracy, which involved 19 unimproved residential properties in the greater Phoenix area. The objective of the conspiracy was to obtain mortgage loans that were substantially larger than the actual value of the properties—often by hundreds of thousands of dollars. Whitman owned 10 of the properties and served as branch manager of the mortgage broker, Academy Mortgage, that processed the loans.

• As part of the conspiracy, Whitman worked with a hand-picked appraiser to obtain inflated appraisals for the properties. He also recruited buyers to purchase the properties at those inflated prices. The buyers typically lacked the income and assets to provide the down-payment or to make the mortgage payments. To overcome this, Whitman secretly supplied the down-payment to the buyers (without disclosing this arrangement) and also provided “cash back” to the buyers at closing. The properties eventually went into foreclosure and cost lending institutions nearly $1,000,000 in losses. Whitman is cooperating with authorities in the prosecution of others.(1)

For the entire press release, see Mortgage Officer Pleads Guilty To His Role In Cash-Back Mortgage Fraud Scheme.

(1) According to the press release, Whitman’s plea is part of an initiative called “Operation Cash Back” in which 40 defendants were indicted and arrested, including many real estate professionals, in June 2008. To date, 18 have entered guilty pleas.