4 Indicted in $16MM Mortgage SchemeParticipants' Connection to Mortgage Firm at Center of Case
An attorney, mortgage broker, loan processor and loan originator have been indicted for the roles they allegedly played in a fraud scheme involving at least 35 mortgage loans worth more than $16.2 million.
The three-year scheme involved using various lenders that financed property purchases throughout Chicago and the nearby suburb Country Club Hills, according to the federal indictment filed by the U.S. Attorney for the Northern District of Illinois. Buyers were fraudulently qualified for loans, while the defendants allegedly profited from fees they were paid and undisclosed payments they obtained.
In the nine-count indictment, Marguerite Elise Dixon-Roper, an attorney; Kareem Broughton, a mortgage broker; Jada Elaine Lucas, a loan processor; and Hakeem Rashid, a licensed loan originator, were charged on June 4 with various counts of mail and bank fraud. The indictment also seeks forfeiture of $16.2 million.
Each count of bank fraud carries a maximum penalty of 30 years in prison and a $1 million fine. Each count of mail fraud carries a maximum of 20 years and a $250,000 fine, and restitution is mandatory. If convicted, the court may impose an alternate fine totaling twice the financial loss suffered by any victim or twice the financial gain to the defendant, depending on which is greater.
Mortgage Firm at Center of Case
At the center of the case is 1st Regent Mortgage Funding Inc., a Chicago-based mortgage banking firm owned by Broughton. Lucas and Rashid were employed by 1st Regent when the fraud occurred.
Between 2005 and May 2008, all four defendants, and others, allegedly colluded to obtain bad mortgages by making false representations in loan applications, HUD-1 settlement statements and other documents about buyers' income, employment, financial condition, source of down payments and intention to occupy the properties, according to the indictment.
Rashid, Broughton and Dixon-Roper allegedly recruited unqualified buyers and then facilitated the purchase of properties. Rashid and Broughton allegedly paid the buyers to purchase the properties, while concealing the payments from lenders. The defendants also are believed to have purchased properties and/or refinanced existing mortgages in their own names, the indictment notes.
Chain of Events
The indictment alleges Broughton received payment from 1st Regent through brokerage fees on the bad loans; Rashid received payment through 1st Regent and another loan originator for falsely qualified buyers; Dixon-Roper received payment for representing unqualified buyers and sellers at real estate closings; and Youssef received payment for processing loans through 1st Regent, based on false information she submitted.
Rashid, Broughton and Dixon-Roper also allegedly received undisclosed payments through entities they controlled, including The Broughton Group, R&B Management, Hamaya Banco and Dixon-Roper's law firm. Rashid and Dixon have been accused of submitting false statements to lenders indicating that escrow money was being held by Dixon-Roper or her law firm. Dixon allegedly directed payments purportedly held in escrow to herself and Rashid, while concealing the nature of the payments from lenders.
The charges are part of a continuing effort by the Financial Fraud Enforcement Task Force to investigate and prosecute mortgage fraud. Since 2008, nearly 200 defendants have been charged in Chicago and Rockford, Ill., with various types of mortgage fraud involving more than 1,000 properties and more than $280 million in potential losses.
Collusion: Key to Scheme
Shirely Inscoe, a fraud analyst at Aite, says mortgage-fraud schemes like this one are difficult to detect. When so many inside players are involved, it's difficult for banks to pick up on the fraud, despite thorough review of the loan documentation.
"A Realtor or an appraiser clearly sees the property involved and knows its market value," Inscoe says. "These parties, and often others, such as closing attorneys, collude to commit fraud and usually split the ill-gotten gains."
Inscoe says elaborate mortgage-fraud schemes typically involve a number of properties and lenders. "The banker approving the mortgage loans may be part of the crime ring, but also may be totally duped," she says. "Many fraud rings have been detected after losses were incurred, where literally every individual in the process was involved in committing the fraud."