A New Jersey real estate developer and attorney both admitted to conspiring to orchestrate a mortgage fraud scheme that led to $3.5 million in losses, according to a press release from the U.S. Attorney’s Office for the District of New Jersey.
According to documents filed and statements made in court, from September 2007 through November 2008, Victor Santos, a real estate developer, and Fausto Simoes, an attorney, conspired with each other and others to fraudulently obtain mortgage loans with a total value of more the $4 million.
Santos orchestrated the scheme to recruit false, or “straw” buyers to purchase 12 properties in Newark, N.J. Using the identity and credit of these straw buyers allowed the conspirators to conceal their identities from the lender as the actual purchasers of the properties. Santos and others induced people into being straw buyers by agreeing to pay each at least $5,000, secure tenants to lease the purchased properties, and cover costs associated with the property, including fees associated with the real estate purchases and the mortgage payments on each of the fraudulently obtained mortgages. Santos, Simoes, and others also caused the submission of fraudulent and false loan applications and documents to the mortgage lender.
Simoes conducted the closings of 10 of the fraudulent transactions and helped perpetuate the fraud by falsely reporting that the straw buyers were providing the cash required at closing when, in fact, Simoes received those funds from a shell company controlled by Santos and another conspirator. For several transactions, Simoes also failed to disclose to the lender that the shell company controlled by Santos and another conspirator would receive a substantial payout from the loan proceeds.
Shortly after the properties were acquired, Santos and his conspirators stopped paying the mortgages. The straw buyers, in whose names the mortgages were obtained and thus were responsible for the payments, did not have enough money to pay the fraudulently obtained mortgages and defaulted, which caused the lender, Fannie Mae, and insurers to lose more than $3.5 million.
Santos, Simoes, and two other conspirators who previously pleaded guilty are all awaiting sentencing. Conspiracy to commit bank fraud carries a maximum penalty of 30 years in prison, a fine of $1 million or twice the gross gain to the defendants or twice the gross loss to others, whichever is greatest.