Delton de Armas, the former chief financial officer of defunct lender Taylor Bean & Whitaker, received a five-year prison sentence Friday for his role in a $2.9 billion mortgage fraud scheme.

TBW was once the 12th largest mortgage lender in the U.S. and sold loans to Freddie Mac and Ginnie Mae. From 2002 through August 2009, its former CEO Lee Farkas and a group of six other conspirators including CFO Delton de Armas swept capital and covered overdrafts between TBW and its funding facilities at Colonial Bank and Ocala Funding.

The conspirators even began selling mortgages that didn't exist when the hole became too large and packaged pools of loans backed by previously repossessed and vacant homes.

Colonial Bank put Farkas in charge of applying for Troubled Asset Relief Program bailouts. When the TARP Special Inspector General looked into the application, investigators discovered the scheme.

According to federal prosecutors, de Armas knew the hole grew to more than $700 million and Farkas told him it widened to $1.5 billion when TBW collapsed. It had eventually grown closer to $3 billion. But he admitted to clearing false reports about Ocala Funding collateral and knowingly sent them to investors.

"Rather than blow the whistle on billions of dollars in fraud, de Armas chose to help conceal it," said SIGTARP Christry Romero in a statement. "This CFO lied to investors, banks, regulators and auditors to cover up the massive fraud scheme which resulted in the failure of both TBW and Colonial Bank."

Farkas received 30 years in prison for running the scheme.

Other conspirators, including high-up executives at Colonial and Ocala, received sentences ranging from 30 months to eight years.

jprior@housingwire.com

@JonAPrior