Settlement agent convicted in multimillion-dollar real estate fraud scheme

Bogus loans defrauded FHA, then sold to Fannie, Freddie

A real estate professional was convicted of 10 counts of fraud and conspiracy in a real estate scam involving 45 properties and $16 million in mortgage loans.

Edward Dacy used the millions in mortgage loans to purchase residential real estate in the District of Columbia and Maryland.

The verdict comes at the end of a three-year investigation relating to this mortgage fraud scheme. A total of nine individuals have admitted their guilt through guilty pleas or were found guilty after trial.

“Mortgage fraud victimizes innocent homeowners and weakens our economic future,” said Acting U.S. Attorney Vincent Cohen. “This settlement agent was supposed to be a check on mortgage fraud, but he instead joined this multi-million dollar rip-off scheme. This guilty verdict demonstrates our commitment to bringing justice to the fraudsters who fall lure to the promise of easy money and in the process harm innocent people and businesses.”

The government’s evidence at trial included testimony from conspirators who were involved in the scheme to defraud banks, mortgage lenders, and the Federal Housing Administration, of money by obtaining mortgage loans on residential real estate properties through false loan applications and documents and fraudulent settlements, and ultimately causing a loss to the banks, lenders, and FHA when mortgages were not paid.

Some of the fraudulently obtained mortgage loans were later resold in the secondary mortgage market to Freddie Mac and Fannie Mae.

“Edward Dacy is a prime example of a real estate professional who believes that he can act above the law, regardless of what loss that causes to others,” said Special Agent in Charge Olga Acevedo. “However, justice has prevailed, and Dacy has appropriately been found guilty. Our office is committed to ferreting out mortgage fraud directed at Fannie Mae and Freddie Mac, which subsequently impacts every American taxpayer.”

The trial evidence included information about conspirators who purchased properties in the names of general partnerships. They then recruited individuals, or straw buyers, to re-purchase these same properties for higher amounts, funded by fraudulently obtained mortgage loans, by promising the buyers that they would not be required to: make financial contributions toward the purchase of the properties; pay the monthly mortgage payments or expenses; or maintain the properties.

These mortgage loans were obtained by fraudulent statements and documents, according to the evidence, including false loan applications and real estate contracts, phony cashier’s checks and verifications from banks, fabricated tax returns and letters from a Certified Public Accountant, and fraudulent deeds conveying title to the nominee buyers.

“The verdict against Edward Dacy should send a strong message to anyone connected with fraudulently originating FHA insured loans that the United States Department of Housing and Urban Development, Office of Inspector General will aggressively investigate loan origination fraud and seek prosecution when possible,” said Acting Special Agent in Charge Julie DeMello.

“This verdict sends a clear message to the real estate and mortgage business community that law enforcement is united in our efforts to investigate those who bilk financial institutions out of millions of dollars,” said Assistant Director in Charge McCabe. “By joining in the scheme to defraud, which involved false loan applications, forged documents and fraudulent statements, Mr. Dacy took advantage of mortgage lenders and banks by falsely leading them to believe that they were supporting homeownership. Together with our federal, state and local law enforcement partners, the FBI will remain vigilant in investigating mortgage fraud schemes and will hold individuals accountable for their fraud schemes.”

According to the trial evidence, Dacy handled the settlements of the real estate transactions. The settlement company received the funding from the mortgage lenders and should have collected the buyers’ cash contributions; it was under the obligation to disburse the money only if all of the mortgage lenders’ conditions were met and the buyers’ financial contributions collected.

Only then would the settlement company be authorized to release the lenders’ money, and pay the costs of the closing, the debts of the property or seller, and any other authorized expenses as set forth on the Settlement Statement. According to the evidence, Dacy joined the multi-million-dollar fraud conspiracy by managing and overseeing the straw buyers’ settlements of the properties, with knowledge that the straw buyers did not pay the cash contribution as required by the lenders.

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