Nine men, including two from Trumbull County, have been named in a 49-count federal indictment alleging they were involved in a mortgage fraud conspiracy involving 48 properties and $7.5 million in loans.
Roy R. Root, 46, of Warren, and Dwayne Townsend, 42, of Youngstown, were named Monday in a bill of information filed by the U.S. Attorney Northern District of Ohio in Cleveland. Seven others were indicted Tuesday by a federal grand jury on one count of conspiracy and 48 counts of wire fraud, one for each property, according to U.S. Attorney Steven M. Dettelbach.
The indictment states that from July 2003 through January 2006, Romero Minor, of Macon, Ga., organized a mortgage fraud scheme involving 48 properties throughout Mahoning and Trumbull counties in which he and Wendell Kerr, 62, of Gautier, Miss., used entities they created to recruit "straw buyers" or investors to purchase the properties.
The straw buyers applied for mortgage loans to purchase properties with no intention of making the properties their primary residences or keeping them as investments and fixing them up, the indictment states.
Minor, 51, is accused of telling the investors that he needed people with good credit to apply for mortgage loans in their name as a way to help people with bad credit who could not get loan approval. He told the investors that after he purchased the properties in their names, he would enter into a rent-to-own agreement with someone with bad credit to help them improve their credit score by renting the property for a year, according to the indictment.
The indictment alleges that Minor told the investors he would collect rent from the tenants, pay the mortgages and taxes for the properties, and maintain them for one year, after which he would sell the property to the tenant after their credit score improved and transfer the property out of the investor's name. He did not assist people with bad credit and did not enter into any rent-to-own agreements, the indictment states.
Instead, according to the indictment, Minor conspired with loan officers Robert Lunsford, 54, of Hubbard, Root and Townsend to prepare and submit fraudulent mortgage loan applications to various mortgage lenders knowing they contained false information in order to secure mortgage loans for the 48 properties.
Minor also is accused of conspiring with mortgage appraisers Timothy Corey, 49, of Youngstown, and Damon Petrich, 39, of Boardman, to have the properties appraised and financed at inflated values. Once the lenders were induced to approve the loans based on the fraudulent applications, Minor received thousands of dollars in closing costs from the mortgage proceeds with the assistance of title agents William Helbley, 57, of Poland, and Michael Wagner, 54, of Canfield, the indictment states. He made more than $1 million on the scheme, according to Assistant U.S. Attorney Mark Bennett.
The indictment states Kerr assisted Minor with finding the investors to apply for the fraudulent loans.
According to Bennett, the companies who approved the loans lost approximately $2.5 million. The companies include Argent Mortgage Co. LLC, Aegis Mortgage Corp., America's Wholesale Lender, First Franklin Financial Corp., BNC Mortgage Inc., Concorde Acceptance and New Century Mortgage Corp. He said all of the companies are based outside northeast Ohio and most of the transactions took place over the phone or the Internet, which is why the charge is wire fraud.
Bennett said the case was investigated by the Youngstown Mortgage Fraud Task Force, which was formed in 2009 and consists of the Cleveland Division, Youngstown office of the FBI, the U.S. Department of Housing and Urban Development-Office of Inspector General, the Ohio Department of Commerce-Division of Financial Institutions, the Ohio Attorney General's Office Special Prosecutions Unit, the Bureau of Criminal Identification and Investigation, and the Mahoning County Sheriff's Office.
Bennett said the case involved an "immense" amount of work, noting each property resulted in hundreds of pieces of paperwork.
He said the fraud was discovered when people who lived in the neighborhood would report the deplorable conditions of certain properties to law enforcement. When local police started to investigate ownership, they detected a pattern of names and companies and notified federal authorities of a potential mortgage fraud scheme.
"Most crime is solved by neighbors who pay attention and get involved," Bennett said.
He said the indictment could have involved more properties, but the U.S. Attorney's Office had to limit the case at some point. However, he said more people could be charged in the case and did not rule out the possibility of a superceding indictment being filed.
Bennett said all the properties involved are in foreclosure and either have been sold at drastically reduced prices at sheriff's sales, have been torn down or remain as blight in the neighborhood and eventually will have to be demolished.
Warren Community Development Director Michael Keys said four of the 15 properties in Warren are on the city's condemn list, including 1554 Adelaide S.E., 165 Iddings Ave., 428 Orchard Place and 508 Belmont St. The latter is slated to be demolished using the city's Neighborhood Stabilization Program grant funds, which is federal money.
"More often than not in these situations, the taxpayers end up footing the bill to tear the homes down," Keys said.
Dan Crouse, a Realtor and former city councilman, said the appraisers involved in the scheme were artificially inflating home prices by as much as 20 percent, which drove up prices for the area's entire housing market.
John Lacy, vice president and mortgage sales manager for Huntington Bank in downtown Warren, similar schemes have affected the mortgage lending industry. He said closing costs are higher, lending guidelines have tightened and there is more paperwork involved.
"Everybody, from lenders to the consumers, is paying for mortgage fraud," Lacy said.