Eight indicted in mortgage cases
Eight Houston-area individuals, from real estate agents to loan officers, have been indicted in connection with alleged mortgage fraud that entangled 300 homes worth more than $40 million, according to the Harris County District Attorney's Office.Mortgage fraud has become so prevalent in the Houston area that the FBI's Houston division has formed a unit dedicated solely to fighting mortgage fraud.Texas ranks seventh in the nation for loans that involved fraud, according to the Mortgage Asset Research Institute, and Houston ranks third in serious early loan defaults.

Eight indicted in mortgage cases
Officials say inflating loan amounts one aspect of schemes
By PURVA PATEL
Copyright 2007 Houston Chronicle
Jan 22, 2007

Eight Houston-area individuals, from real estate agents to loan officers, have been indicted in connection with alleged mortgage fraud that entangled 300 homes worth more than $40 million, according to the Harris County District Attorney's Office.

Not all of the individuals indicted on felony theft charges worked together, but one common escrow agent was involved in all the transactions, investigators said.

"Sometimes they stole identities," said Markay Stroud, an assistant district attorney. "Sometimes they would submit fake invoices to the title company to get reimbursements at closing. Often they'd boost the price of the house and pocket the difference."

Although the alleged fraud spanned the Houston area, many of the homes involved were in Missouri City and in ZIP code 77004, which is just south of downtown, Stroud said.

According to the FBI, this is one of the larger local schemes to come to light.

"That many properties and that amount of money is fairly significant for the Houston area and would indicate a fairly sophisticated crime ring," said Rodney Miller, who heads a mortgage fraud task force for the FBI.

Mortgage fraud has become so prevalent in the Houston area that the FBI's Houston division has formed a unit dedicated solely to fighting mortgage fraud.

Texas ranks seventh in the nation for loans that involved fraud, according to the Mortgage Asset Research Institute, and Houston ranks third in serious early loan defaults.

The Texas Department of Insurance investigators said most of the fraudulent transactions in the recent batch of indictments involved finding a straw buyer with a high credit score and persuading that person to buy one or more properties whose appraisals, unbeknownst to the buyer, had been inflated.

According to the Insurance Department, this is how the straw buyer schemes worked:

The buyer's strong credit score was used get a loan approved with less scrutiny. Once the sale went through, the scammers would pocket the difference between the selling price and the inflated loan amount.

They would siphon funds by charging consulting fees, remodeling fees or other costs that would be disbursed at the closing by the escrow officer.

The buyer would then be left with a mortgage much higher than a home's true value. Many of the homes ended up in foreclosure.

Two had been arrested as of Monday, including Stevie Lynn Johnson.

Stroud said more indictments may be coming.

Investigators said Johnson, 37, served as the closing officer on all the properties.

"He was the common link," said Bill Whalen, a fraud investigator with the Insurance Department who assisted in the investigation.

Johnson is being held at the county jail, and was given an initial bail of $3.5 million, which was later reduced. Johnson's attorney, Juanita Barner, said the transactions didn't result in banks losing any money.

"It's very difficult to see this as a theft," Barner said.

"There are a lot of people involved in this and we really need to look further to determine what really happened."

Others indicted include Mark Anthony Jones; James Jackson; Reginald Washington; John Turner; Tammy Washington, also known as Tammy Scott; Kenneth Moore; and William Brooks, also known as Lincoln Scrange.

Jones has been released from jail on a $250,000 bond. His attorney, Lori Gray, said Jones is fighting the charge.

"He is denying any theft allegation and waiting to have his opportunity to present his side," she said.

Tammy Washington didn't return a call for comment after she was reached by telephone. The others could not be reached for comment.

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