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Massachusetts man cops to 9-year multifamily mortgage fraud conspiracy

Used fake loan documentation to obtain loans that cost $4.3 million in losses

A Massachusetts man admitted in court last week that he took part in a nearly decade-long multifamily mortgage fraud conspiracy that defrauded financial institutions of millions of dollars.

According to the U.S. Attorney’s Office for the District of Massachusetts, Joseph Bates pleaded guilty last week in federal court to one count of conspiracy, three counts of wire fraud affecting a financial institution, and two counts of bank fraud. 

Court documents showed that Bates and other conspirators took part in a mortgage fraud scheme that stretched from 2006 through 2015. The scam involved at least two dozen fraudulent loan transactions and caused $4.3 million in losses to lenders.

In the scam, Bates and the others allegedly aided in the submission of false borrower information to a number of lenders on loans to be used to buy properties in Massachusetts.

According to court documents, the properties in question were primarily multifamily buildings of two-to-four units, which the conspirators converted into condominiums.

After buying the buildings, the conspirators recruited other borrowers to purchase the individual condo units, which were also financed by fraudulent mortgages.

Court documents showed that the false information submitted to lenders included representations about the borrowers’ employment, income, assets, and intent to occupy the properties.

In fact, the false employment information showed the borrowers were employed by what turned out to be shell companies that were used as part of scheme.

The employment information included false representations about the income that the borrowers earned from those companies. As it turned out, the borrowers actually received little or no income from those supposed jobs. 

Additionally, the income listed on the borrowers’ loan applications “substantially overstated” their true income,” the U.S. Attorney’s Office stated.

The conspiracy also involved preparing fabricated tax returns for some of the borrowers that contained false and inflated income. Some of those tax returns were submitted to lenders in support of the fraudulent loan applications.

And because the borrowers did not have the ability to repay the loans in question, in many cases, they defaulted on their loans. Those defaults resulted in foreclosures and losses to the financial institutions of more than $4.3 million.

As stated above, Bates pleaded guilty to one count of conspiracy, three counts of wire fraud affecting a financial institution and two counts of bank fraud. 

According to the U.S. Attorney’s Office, the charges of bank fraud and wire fraud affecting a financial institution allow for sentences of no greater than 30 years in prison, five years of supervised release and a fine of $1 million. The charge of conspiracy allows for for a sentence of no greater than five years in prison, three years of supervised release and a six-figure fine.

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