A mortgage fraud case that has emerged out of Kansas City involves 280 loans for more than $17 million.
Jeffrey Tyler Wine appeared to be a young, aggressive entrepreneur trying to take advantage of Kansas City’s real estate market.
Through Sunrise Equities and other real estate investment companies he operated, Wine, 28, was gobbling up houses he bought at reduced rates at foreclosure, tax and bankruptcy sales.
Then, after rehabbing the houses, he put them up for sale as investment properties.
Except, according to federal prosecutors in Kansas City, Wine was hardly a legitimate business operator.
Instead, they say he was the ring leader of a large scale $17.5 million mortgage fraud scheme that involved 280 properties and cooperation from mortgage brokers.
Wine has pleaded guilty in U.S. District Court for the Western District of Missouri to charges of mortgage fraud conspiracy and money laundering. He faces up to 15 years in prison, a fine of as much as $500,000 and restitution to the investors he has admitted to misleading.
Prosecutors say coconspirators in the scheme included mortgage brokers, who prepared false and fraudulent loan applications that were submitted to mortgage lenders in the names of victims duped in the scam.
“Not only were dozens of financial institutions directly victimized,” U.S. Attorney Bradley Schlozman said in a statement, “but this type of fraud scheme ultimately impacts all consumers.
“When unscrupulous individuals lie on loan applications and misrepresent the condition of properties, they undermine the integrity of the real estate market and the local economy suffers as a result,” Schlozman said.
According to Schlozman, Wine used his companies to buy properties at reduced rates. He would rehab the properties and advertise them as investment properties with no money down. But the work, prosecutors say, was “shoddy” and of “poor quality.”
Wine enticed buyers by offering to provide down payments and closing costs, securing renters, and managing the properties.
“Victim-investors were also told that Sunrise Equities would ensure that mortgage payments were paid even if the properties were not rented, and that a positive cash flow from the properties was guaranteed,” prosecutors said.
Lenders were tricked with false information and phony documents.
To mislead lenders about a buyer’s assets, Wine and his coconspirators would sometimes deposit cash into the buyer’s bank account. They also provided the money for investors to take to closings and pay closings costs.
Wine also managed the properties, but he submitted false monthly reports to investors about the amount of rent paid, the expenses incurred on the properties and the amount of money earned.
“This induced victim-investors to purchase additional properties,” prosecutors said.
Wine also pleaded guilty to money laundering, admitting he used funds obtained through the fraud to purchase a 400-ounce gold bar for $177,000.
This is the second massive case to emerge recently.
In May, California mortgage broker Michael Schneider was arrested on allegations he stole $17.7 million from elderly investors he fooled with fake loan documents through his company, California Plan Inc.
But police in Santa Clara say as much as $50 million could be involved in the case– the largest in the county’s history.
Det. Steve Hoesing of the Santa Clara Police Department told MortgageDaily.com that when two separate cases against him are combined, the total amount of the fraud will be $40 million to $50 million.
“We always suspected that it would be as large as $50 million … when you combine the cases in Santa Clara and Santa Cruz,” Hoesing said
Some of the stolen funds may have gone toward Schneider’s investment in Coastal International Airways, a Virgin Islands airlines, and expensive California properties, according to the San Jose Business Journal.
