R/E Agent Dodges Major Time; Gets 8 Months Prison, 6 Months House Arrest For Role In Illegal Short Sale Flipping Ripoff Using 'Back-To-Back' Closing

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

• David B. Fein, United States Attorney for the District of Connecticut, announced that ANNA McELANEY, 40, of Norwalk, was sentenced [...] to eight months of imprisonment, followed by three years of supervised release, the first six months of which McELANEY must spend in home confinement, for her involvement in a “short sale” mortgage fraud scheme.



• A short sale transaction involves a mortgage holder or lender entering into an agreement to release its mortgage or lien on real property in exchange for payment of less than the total amount owed on the underlying debt. Many short sale transactions are legitimate.



• According to court documents and statements made in court, McELANEY, a real estate agent, and Sergio Natera, also a real estate agent, defrauded Regions Bank, which held two mortgages on a residential property in Bridgeport.



• On December 5, 2007, McELANEY, who was a listing agent for the property, received an offer to purchase the property for a price of $132,500. However, McELANEY and Natera informed Regions Bank that the highest offer to purchase the property was for $102,375 and that it was made by BOS Asset Management, LLC.



• McELANEY and Natera concealed from Regions Bank that there was a higher offer by another bidder, that Natera owned BOS Asset Management, LLC, and that McELANEY and Natera planned to keep the difference between the two prices.



• Based on the false and incomplete information provided to it, Regions Bank agreed to the short sale for the lower price, and released its mortgages on the property.



• On June 9, 2008, McELANEY and Natera arranged for two sales of the property to occur on the same day [ie. 'back-to-back' real estate closing].(1) The first sale was from the owner of the property to BOS Asset Management, LLC for $102,375; the second sale was from BOS Asset Management, LLC to the original bidder on the property for $132,500. McELANEY and Natera retained the difference between the two sale prices.

For the U.S. Attorney press release, see Real Estate Agent Sentenced To Federal Prison For Defrauding Bank In Short Sale Mortgage Fraud Scheme.

(1) See The Spokesman Review: Short-sale fraud puts cash in wrong pockets for a related story on short sale fraud, particularly those using 'back-to-back' closings:

• According to CoreLogic, the same-day turnaround of a short sale can be achieved by what is known as a “back-to-back” closing. In such, the investor has two separate contracts: a purchase contract with the short-sale lender as well as a sale contract with a third party.



• The transactions are choreographed and presented to a title company on the same day. The purchase transaction is first executed, followed immediately by the sale contract.



• “Reasonably, an investor may buy a short-sale property, perform verifiable improvements to the home over a period of time, and resell the property for a legitimate financial gain,” the CoreLogic authors wrote.



• “Nearly one in six (16 percent) ‘suspicious’ short sales is resold on the same day, making legitimate increases in value doubtful.”