A New Jersey real estate developer and attorney have both admitted to conspiring to orchestrate a mortgage fraud scheme that resulted in losses of $3.5 million, according to a press release from the U.S. District Attorney’s Office of New Jersey. .
According to documents filed and court statements, from September 2007 to November 2008, Victor Santos, a real estate developer, and Fausto Simoes, a lawyer, conspired with each other and others to fraudulently obtain mortgages from a total value of over $4 million.
Santos orchestrated the scheme to recruit fake buyers or “straw buyers” to buy 12 properties in Newark, NJ. Using the identity and credit of these straw buyers allowed the conspirators to conceal their identity from the lender as the actual purchasers of the properties. Santos and others enticed people to become straw buyers by agreeing to pay at least $5,000 each, find tenants to rent purchased properties, and cover the costs associated with the property, including associated fees. real estate purchases and mortgage payments on each fraudulently obtained mortgage. Santos, Simoes and others also caused fraudulent and fake loan applications and documents to be submitted to the mortgage lender.
Simoes closed 10 of the fraudulent transactions and helped perpetuate the fraud by falsely reporting that straw buyers were providing the money needed to close when in fact Simoes received those funds from a company screen controlled by Santos and another conspirator. For several transactions, Simoes also failed to disclose to the lender that the front company controlled by Santos and another conspirator would receive substantial payment from the loan proceeds.
Shortly after acquiring the properties, Santos and his conspirators stopped paying the mortgages. The straw buyers, in whose name the mortgages were obtained and were therefore responsible for the payments, did not have enough money to pay the fraudulently obtained mortgages and defaulted, resulting in the loss of more than 3.5 million dollars to the lender, Fannie Mae, and the insurers.
Santos, Simoes and two other conspirators who previously pleaded guilty are all awaiting sentencing. A conspiracy to commit bank fraud is punishable by up to 30 years in prison, a fine of $1 million or double the gross gain for defendants or double the gross loss for others , whichever is greater.