A federal grand jury has indicted three people in a mortgage-fraud scheme involving a dozen homes along the Wasatch Front, the latest in a growing problem that has been frustrating federal authorities.
Ronald William Haycock Sr., 61; Lyle Clay Smith, 43; and Jamis Melwood Johnson, 57, were indicted on 10 counts of mail fraud, 12 counts of wire fraud, 15 counts of money laundering and a single charge of conspiracy. The 38-count indictment accuses the men of perpetrating a multimillion-dollar fraud scheme involving homes in Highland, Draper, Salt Lake City, Sandy, Pleasant Grove, Provo, Alpine and Farmington.
"They recruited straw buyers with good credit scores to use their names to purchase residences," U.S. Attorney for Utah Brett Tolman said Wednesday. "Haycock and Smith paid all the down payments, paid the monthly payments and controlled the properties."
The straw buyers were paid anywhere from $7,000 to $20,000 in incentive money to sign their names to the papers, Tolman said, while the accused men falsified loan applications, inflated appraisals and inflated the straw buyers' income — "sometimes as much as 400 to 500 percent of the straw buyers' income." The men also are accused of fabricating assets and siphoning excess proceeds from the loans.
"These were not unsophisticated defendants who engaged in misconduct but individuals with some knowledge who schemed in order to take advantage of unsuspecting homeowners, unsuspecting straw buyers and unsuspecting lenders," said Tim Fuhrman, the Special Agent-in-Charge of the Salt Lake City office of the FBI.
The indictment lists a number of mortgage lenders as "victims" of the scheme, and Tolman was unsure about whether the straw buyers were victims, too.
"We have seen in some instances where they are more akin to a victim. But we have also seen very sophisticated straw buyers, very aware of what is happening, contributing to the deceptions that were being placed on the mortgage industry," he said.
Tolman said they would look at each straw buyer and assess their level of sophistication in the scheme before deciding to pursue criminal charges against any of them.
The straw buyers were told they would have no financial risk and would not have to make payments or even occupy the home. But then the loans stopped being paid, "leaving the straw buyers with mortgages that they had no ability to repay, and mortgage lenders with non-performing loans secured by the properties worth far less than the outstanding loan balances," the indictment said.
Attempts to reach the accused men were unsuccessful. They will be issued summonses to appear in U.S. District Court in Salt Lake City. Federal prosecutors filed notice that they intend to seize more than $2.8 million in assets if the men are convicted.
Mortgage fraud has become such a crisis that Utah has initiated its own Mortgage Fraud Task Force, made up of the FBI, the U.S. Department of Housing and Urban Development, the U.S. Postal Service, the Internal Revenue Service, the Utah Department of Insurance, the Utah Department of Public Safety, the Davis and Utah County Attorney's Offices and the Utah Department of Real Estate.
"Unfortunately, since its inception, rather than seeing a reduction in the number of cases we're investigating, we have seen an increase," said Fuhrman. "We're conducting approximately 50 investigations with a rough estimate value of more than $150 million in losses."
The problem is the top priority of the FBI for financial crimes.
"There's a wide range of victims in a mortgage fraud," Tolman said. "Not just the community and the homes near it, but the banks that lend, the institutions themselves that have to deal with it. There is a large, destructive path that is carved out in your economic landscape when it comes to mortgage fraud."
E-MAIL: bwinslow@desnews.com