Falsifying loan applications will cost a 24-year-old mortgage company worker from Michigan nearly $1 million and the next two years of her life.
Kristy Lynne Hess of Ypsilanti, MI, who worked at ABN AMRO Mortgage Group’s InterFirst Wholesale Mortgage Lending division, has pleaded guilty to one count of bank fraud, according to a written statement released by the U.S. Attorney’s office in Detroit.
In return for pleading guilty prosecutors dropped another 10 counts, U.S. Attorney for the Eastern District of Michigan Stephen J. Murphy said in the statement.
However, U.S. District Judge John Corbett O’Meara considered all 11 counts in imposing the sentence.
Hess worked as a correspondent service representative whose duties included working with mortgage brokers to process and screen mortgage applications, according to a copy of the indictment brought against her.
Murphy said in the fall of 2002 the false information Hess entered in the company’s computers allowed borrowers to receive mortgage loans that were higher than the appraised value of the property they were buying.
“Such loans would not have been granted but for these false entries by Ms. Hess,” Murphy said. “Many of the borrowers subsequently defaulted on these loans causing substantial losses to ABN AMRO.”
Mlive.com, a news Web site, reported that Hess called the scheme “bankruptcy for profit.”
Loan officers were also involved in the scheme and may have been paying kickbacks to Hess, prosecutors said. But details on that part of the investigation have not been released.
The indictment explains how the scheme worked.
Mortgage brokers would submit electronic mortgage loan applications to InterFirst on behalf of their clients.
The applications were then electronically processed using Freddie Mac’s software, “Loan Prospector,” which generated a list of conditions precedent to any mortgage loans such as an appraisal, the borrower’s income and asset verification and flood certification.
Brokers would be advised of any conditions required for loan approval and asked to submit documentation to satisfy any questions or concerns.
The broker would then fax the necessary documentation.
Hess was responsible for personally checking and certifying that all the conditions were met and then record the information in the company’s computer system.
But Hess falsely certified loans that would not otherwise have been approved.
Mlive.com reported that InterFirst learned of the scheme through an anonymous tip. The tipster reported that Hess was receiving money from mortgage brokers to approval the loans.
The borrowers would eventually declare bankruptcy and keep some of the loan proceeds.
An affidavit filed in court indicated that Hess was approving loans as refinances when in fact they were for new home purchases with inflated values.
