Boston Feds Squeeze Guilty Plea Out Of Real Estate Attorney For Running Short Sale Racket; Admits To Duping Banksters Into Taking 'Haircuts' On Underwater Homes By Falsely Leading Them To Believe Proposed Transactions Were Arms-Length Deals Involving Unrelated Parties

From the Office of the U.S. Attorney (Boston, Massachusetts):

• A real estate attorney pleaded guilty [] to participating in a far-reaching scheme to defraud banks and mortgage companies as part of a conspiracy involving sham “short” sales of numerous residential properties in the Merrimack Valley of Massachusetts.
  
  Hyacinth Bellerose, 50, of Dunstable, Mass., pleaded guilty to one count of conspiracy to commit bank fraud. U.S. District Court Judge Rya W. Zobel scheduled sentencing for Feb. 4, 2016.
  
  Bellerose colluded with others – including a Methuen loan officer and a Haverhill real estate agent who were not identified in the charging document – to defraud various banks through the use of bogus short sales of homes in Haverhill, Lawrence and Methuen. A short sale is a sale of real estate for less than the value of any mortgage debt on the property. Short sales are an alternative to foreclosure that typically occur only with the consent of the mortgage lender, and that generally result in the lender absorbing a loss on the loan and releasing the borrower from the unpaid balance.
  
  By nature, short sales are intended to be arms-length transactions in which the buyers and sellers are unrelated, and in which the sellers cede their control of the subject properties in exchange for the short-selling bank’s agreement to release them from their unpaid debt. In this case, Bellerose colluded with others to feign a short sale and thereby defraud banks of the full value of the mortgage.
  
  The conspiracy began in approximately August 2007 and continued through June 2010, a period that included the height of the financial crisis and its aftermath. Home values in Massachusetts and across the nation declined precipitously, and many homeowners found themselves suddenly “underwater,” with their homes worth less than the mortgage debt they owed. As part of the scheme, Bellerose and her co-conspirators submitted materially false and misleading documents to numerous banks in an effort to induce them to permit the short-sales – and thereby to release the purported sellers from their unpaid mortgage debts – while simultaneously inducing the purported buyers’ banks to provide financing for the deals. In fact, the purported sellers simply stayed in the homes with their debt substantially reduced while Bellerose and others made money from the transactions fees associated with the fake sales. In some cases, the conspirators then re-sold the properties in genuine arms-length transactions for a profit.
  
  As part of the conspiracy:
  
  The conspirators [among other things] falsely led banks to believe that the sales were arms-length transactions between unrelated parties, when in fact, the transactions were not arms-length, and the sellers retained control of (and frequently continued to live in) the properties after the sale. In some cases, the purported third-party buyers were actually the spouses, parents or children of the purported sellers. [...]

Source: Dunstable Real Estate Attorney Convicted in Mortgage Fraud Conspiracy.