Two Methuen men – an attorney and loan officer – pleaded guilty recently to participating in a conspiracy to defraud banks and mortgage companies by engaging in sham “short” sales of residential properties in the Merrimack Valley.
Separately, a Methuen real estate broker was arrested March 22 on related charges, and a Dunstable attorney was sentenced after pleading guilty to participating in the same conspiracy.
According to court records, Jasmin Polanco, 37, a real estate closing attorney, and Vanessa Ricci, 40, a mortgage loan officer, each pleaded guilty in U.S. District Court to one count of conspiracy to commit bank fraud.
Sentencing for Ricci is set for June 22 in U.S. District Court. Polanco’s sentencing hearing has not yet been scheduled.
Separately, a real estate broker from Methuen, Greisy Jimenez, 49, was indicted on two counts of bank fraud and one count of conspiracy to commit bank fraud in connection with the same alleged scheme.
U.S. District Court Judge Rya W. Zobel also sentenced Hyacinth Bellerose, 51, a real estate closing attorney from Dunstable, to time served and one year of supervised release to be served in home detention.
According to court records, the charges stem from an alleged plan to defraud various banks via bogus short sales of homes in Haverhill, Lawrence and Methuen in which the purported sellers remained in their homes, with their debt substantially reduced.
A short sale is a sale of a property where the proceeds of the sale are less than the balance owed on the mortgage covering the property. As the number of homeowners and buyers considering short sales increase, so does the number of incidents of short sale fraud.
Short sale fraud schemes come in different disguises, but a few are more common than others. They can include simultaneous buyers, leaseback scams and seller’s stray buyers.
Generally, the lender absorbs a loss on the loan and releases the borrower from the unpaid balance.
By their very nature, short sales are intended to be arms-length transactions in which the buyers and sellers are unrelated, and in which the sellers give up their control of the home in exchange for the short-selling bank’s agreement to release them from their unpaid mortgage debt.
The allegations in the Methuen-area cases allegedly began in approximately August 2007 and continued through June 2010, a period that included the height of the financial crisis and its aftermath.
As part of the alleged scheme, Jimenez, Polanco, Ricci, Bellerose and others submitted materially false and misleading documents to numerous banks in an effort to convince them to permit the short-sales, in turn releasing the sellers from their unpaid mortgage debts, while simultaneously inducing the buyers’ banks to provide financing for the deal.
What happened? The purported sellers simply stayed in their homes, with their debt substantially reduced.
According to court records, the suspects allegedly falsely led banks to believe that the sales were arms-length transactions between unrelated parties. However, the buyers and sellers were frequently related, and the sellers retained control of (and frequently continued to live in) the properties after the sale.
The suspects also allegedly submitted phony “HUD-1 Settlement Statements” to banks that did not accurately reflect the disbursement of funds in the transactions.
The charge of bank fraud and conspiracy to commit bank fraud provides for a sentence of no greater than 30 years in prison and a fine of $1 million. While federal sentences tend not to be the maximum, the judge will have to take into account both U.S. Sentencing Guidelines and other statutory factors.