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Prosecutors Charge 14 in|New York Mortgage Fraud

(CN) - More than a dozen participants in a New York mortgage scheme are facing federal fraud charges, the U.S. Attorney's Office announced. Prosecutors say the defendants conspired to "flip" homes and falsely appraise them.

Prosecutors say 17 home buyers defaulted on their mortgages and faced foreclosure after the 14 sellers, lenders and appraisers duped them into taking out loans they could not afford.

"Schemes like the one alleged here helped contribute to the home mortgage crisis," U.S. Attorney Preet Bharara said in a statement.

"In this particular case, not only did the alleged fraud victimize the home buyers themselves, who were duped into buying homes they couldn't afford and who now face foreclosure and eviction, but also the government, which insured these bad loans."

Prosecutors say the sellers bought and re-sold homes without making substantial improvements to "inexperienced, low-income buyers" at inflated prices. The appraisers allegedly gave bogus estimates on the homes, so the buyers would take out larger mortgages.

The lender, Cambridge Home Capital, then underwrote the mortgage for the buyers knowing that buyers could not repay the loan and that the appraisals were exaggerated, according to the complaint.

In one loan application, prosecutors say Cambridge changed a buyer's occupation from "security guard" to "head chef" and augmented his income by 50 percent.

The government seeks millions in civil penalties based on violations of the Financial Institutions Reform Recovery and Enforcement Act and the False Claims Act.

The 14 defendants are: Buy-a-Home, Metropolitan Housing, Gramercy Funding Group, Mitchell Cohen, Cambridge Home Capital, Seth Kramer, Craig Hyman, Seth Lapidus, Jacqueline Derrell, Cambridge Funding Group, James Goldberg dba JJG Real Estate Appraisal Services, Premier Appraisal Service, William Buckley and Robert Micheline dba P&M Appraisals.

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