Loan Officer Sentenced In ‘Flipping’ Scam

A Chicago-area loan officer has been sentenced in a ‘flipping’ scam involving twenty defendants. Tamira Smyth is among six defendants already sentenced in the case, with 14 others awaiting sentencing. All twenty defendants have been convicted, according to Randall Samborn from the Department of Justice (DOJ). Samborn said Smyth helped in the investigation of the case as a key informant by performing undercover work.

According to a copy of the unsigned and unfiled 16-count Grand Jury indictment provided by the DOJ to MortgageDaily.com, Smyth also goes by the names Tamira Russo, Phyllis Pointer and Jean Venturi. She allegedly participated in the flipping scam by creating and causing the creation of false documents on behalf purchasers recruited to immediately purchase properties from other defendants at fraudulently inflated prices.

In all, at least 80 properties for more than $10 million were involved, including $3 million in FHA-insured loans. An early DOJ announcement in the case — dubbed “Operation Rogue Mortgages” — said that $4.4 million in fraudulent spread proceeds were earned by the defendants. Among the defrauded lenders were:

• American National Bank of Chicago, IL
• Crossland Mortgage Corporation, Madison, WI
• First Collateral Services, Incorporated, Walnut Creek, CA
• ICM Mortgage, Greenwood Village, CO
• LA Worldwide Mortgage, Oakbrook Terrace, IL
• RBMG, Columbia, SC
• Saxon Mortgage, Inc., Glen Allen, VA
• Temple-Inland Mortgage Corp., Austin, TX

According to indictment, the Chicago scam involved a closing attorney & two paralegals, a loan processor & two loan originators (including Smyth), seven real estate investors, two appraisers, a licensed real estate agent, two straw purchasers and two fraudulent borrowers. Some of the defendants had multiple roles.

An employee of the Illinois Secretary of State’s office, Leonard Jenkins, was mentioned as a “co-schemer” in the indictment but not as a defendant. Jenkins is accused of providing fictitious identifications to some of the defendants and of being one of the fraudulent purchasers. The earlier DOJ announcement indicated that he was sentenced in 1999 to eight months in prison after he pleaded guilty to corruption charges.

The indictment said that the defendants began the ‘flipping’ scheme around 1995, using mainly “cash” transactions to purchase properties located on the west and south sides of Chicago (first closing). They then paid “straw purchasers”, who allowed the use of their individual credit histories. Some purchasers participated because they were told that they could purchase properties with no down payment and receive cash back at closing.

Fraudulent loan packages along with inflated appraisals ensured that some of these buyers qualified for financing, according to the indictment. Appraisers were allegedly paid a $1,000 bonus for providing the inflated values. Once financing was obtained, the attorney-defendant allegedly represented multiple parties at the closings. The second closing, where the fraudulent buyer purchased the property at the inflated amount, typically occurred just before the first closing, where the defendants purchased the properties for cash. By structuring the closings this way, the defendants used the mortgage loan proceeds from the fraudulent transactions to complete the “cash” first closing. In some cases after the second purchase closed, the properties were refinanced by different combinations of defendants using fraudulent applications and inflated appraisals.

In a copy of the unsigned and unfiled plea agreement provided by the DOJ, Smyth acknowledged that from approximately 1995 to 1998, she fraudulently facilitated the purchase and/or sale of at least 27 Chicago area properties, causing estimated mortgage losses of approximately $2.2 million. In addition, she personally obtained 3 loans for $46,755 using false information, which the lender took a total loss on. The plea agreement went on to say that for most of the 27 transactions, the second buyers subsequently defaulted on the mortgages and the lenders foreclosed on the properties, including at least 9 FHA loans.

Smyth was previously convicted in Illinois and Wisconsin for unrelated crimes. She was sentenced to twenty months in prison but could have received up to five years. Smyth was quoted by the Chicago Tribune as saying to the judge, “my goal in life is to live righteous and truthful from this day on.”

A complete list of defendants in the case follows.