CT Feds Indict Two In Alleged "Short Sale" Flipping Scam Using Straw Buyers To Dupe Lenders Into Accepting Less Than Full Payment On Underwater Loans

From the Office of the U.S. Attorney (Bridgeport, Connecticut):

• Nora R. Dannehy, United States Attorney for the District of Connecticut, [...] announced that a federal grand jury sitting in Bridgeport has returned a two-count indictment charging SERGIO NATERA, 35, of Bridgeport, and ANNA McELANEY, 38, of Norwalk, with one count of conspiracy to commit bank fraud and one count of bank fraud. NATERA and McELANEY are licensed real estate agents and the charges stem from an alleged “short sale” mortgage fraud scheme involving four properties located in Connecticut.

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• The indictment alleges that in 2007 and 2008, NATERA and McELANEY conspired to defraud financial institutions of the full proceeds due to them on four separate real estate transactions in Bridgeport (2), Monroe and Wallingford. The indictment alleges that NATERA and McELANEY created straw buyer transactions in order to negotiate with mortgage holders to allow sales of the properties to occur without paying the mortgages in full. During the negotiations with the mortgage holders, NATERA and McELANEY knew that legitimate purchasers already had executed purchase and sale agreements with the property owners to purchase the property at higher prices.

• On each of the transactions, NATERA and McELANEY are alleged to have arranged for two closings to take place, the first from the property owner to the straw buyer at the short sale price, and the second from the straw buyer to the legitimate purchaser at a higher price. The indictment alleges that the mortgage lenders did not know about the second closing and received no proceeds from the second closing.(1)

For the U.S. Attorney press release, see Two Connecticut Real Estate Agents Charged with Engaging In Short Sale Mortgage Fraud Schemes.

(1) For other stories on alleged short sale flipping scams, see:

• Title insurance group's move could stymie short sale flips (Attorneys' Title Insurance Fund notified its 6,000 member attorneys this week that it will not insure deals made with a popular – but controversial – method for closing flips of short sales),
• ATIF Refuses To Issue Title Insurance On Controversial Short Sale Deals Involving Simultaneous Investor "Flips",
• NY Feds Indict Four In Alleged Short Sale, Flipping Fraud Targeting Homeowners In Foreclosure; Unwitting Straw Buyers Left Holding The Bag,
• Shaky Loan Modifications That Turn Into Questionable Short Sales?,
• Unwitting Prospective Buyer Gets Caught Up In Controversial Short Sale Flipping Attempt Involving Vacant Home In Foreclosure,
• Detroit Feds Indict Five In Alleged Straw Buyer Scam Involving Fraudulent Short Sales Of Luxury Condos.