San Diego Mortgage Broker Pleads Guilty in $100 Million Scam

Monday, April 29, 2013

In the years leading up to the financial collapse of 2008, and all through it, financial institutions created innovative, and often questionable, methods of extracting money  from a bloated housing market.

But some folks, like unlicensed mortgage broker Mary Armstrong of San Diego, snatched it the old-fashioned way: through “fraud, money laundering and conspiracy” using fake documents and straw buyers to sell $100 million worth of real estate at inflated prices.

Last week, Laura E. Duffy of the U.S. Attorneys’ Office and Federal Housing Finance Agency (FHFA) Inspector General Steve A. Linick announced that Armstrong had pleaded guilty to defrauding mortgage lenders with the help of three co-conspirators and “investors” she recruited via the Internet and Los Angeles Times advertisements. Her colleagues—real estate agent Teresa Rose, Seattle businessman Justin Mensen and accountant Audrey Yeboah—had already pleaded guilty.

Armstrong and company made their living by: creating false loan applications to be submitted by “straw buyers” who were each paid $10,000; fabricating documents like W-2 forms and bank statements; securing the mortgages using 100% financing to avoid making a down payment; inflating the price of the real estate by $100,000 or more; and having the fake investors default on the loans and kick back the proceeds to them.

The kickbacks, totaling $14.5 million, were concealed through sham construction loans. The purchase loans, which were sold in secondary markets, cost lenders, secondary-market investors, Fannie Mae and Freddie Mac an estimated $20 million.   

Armstrong was indicted in May 2012, fled and was arrested in Las Vegas two months later.

–Ken Broder


To Learn More:

Mortgage Broker Pleads Guilty to $100 Million Loan Origination Fraud (Office of the U.S. Attorney Southern District of California) (pdf)

Mortgage Broker Admits $100 Million Scam (Courthouse News Service)

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