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Saturday, Oct. 25, 2014

Mortgage fraud bust nets four

Wednesday, May 27, 2009

SHELBYVILLE - Four arrests were made Tuesday in a multi-million dollar mortgage fraud scheme involving hundreds of homes in Bedford County.

The arrests were the result of a 16-month joint investigation by the Bedford County Sheriff's Department, the Federal Bureau of Investigation and the Internal Revenue Service.

Taken into custody without incident were:

* Roger Dwight Ritch, 52, of Shelbyville, known in Lewisburg for Ritch Building Supply and, more recently, his sale to Lewisburg of 48 acres - land that had been the Murray Farm where Tennessee Walking Horses were bred. The sale price was $525,000.

* Three Murfreesboro men identified as William Thomas McMahan, 52, Jonathan B. Henderson, 39, and Carrie Camerson Galvin Snow, 40.

All four were indicted by a federal grand jury in Chattanooga. They face one count each of bank fraud and money laundering.

A federal indictment against a fifth defendant remains under seal. The four were transported to Chattanooga pending a hearing before a United States Magistrate.

The joint investigation was conducted by BCSD Detective Sgt. Brian Farris, Special Agent Richard Poff of the FBI, and Special Agent Lynn Barker of the IRS.

Millions involved

"These people wanted a piece of the American Dream, a piece of the pie ... but in reality ... they were being scammed," Farris said of the alleged victims, who could total more than a thousand.

The scheme involved the sale of houses by American Value Homes totaling approximately $30 million, and foreclosure on the fraudulent loans has resulted in a loss to lenders totaling approximately $2.4 million, according to the sheriff's department.

"We were getting a lot of eviction notices on a lot of homes in one area," Sheriff Randall Boyce said Tuesday. "The citizens that were getting put out of their houses were complaining there was something wrong with the deal -- they were making their payments and still losing their homes."

The federal indictment alleges that the defendants devised a scheme to obtain financing under false pretenses for purchasers of residential properties developed by American Value Homes, a construction company that Ritch owned in Shelbyville.

As part of the scheme, the indictment alleges that the defendants did business as Mortgage Processing Services and Value Title, preparing loan applications containing false information, misrepresented the down payment amount made by borrowers, and falsely represented the employment status and income of borrowers.

Boyce said the mortgage fraud crisis that has plagued the nation "has greatly affected a number of citizens of Bedford County who were victimized by this particular scheme and left with no home and with ruined credit.

Foreclosures continue

Farris said that approximately 300 houses were involved in the alleged scheme. If those homes were sold for $120,000 to $140,000 apiece, the $30 million would be "a conservative figure."

Out of 253 properties sold by American Value Homes and their associates, Farris said, 137 of those homes have gone into foreclosure -- more than 54 percent.

Boyce said many of the homes involved were concentrated in one area in northern Shelbyville.

In his talks with county real estate agents, Farris says that property values have been impacted by the alleged scheme.

"It has destroyed the housing market in this county," Farris said. "There's houses still going into foreclosure, and we don't know what the long term effects will be."

If 300 families have been impacted, with an average of four persons per household, as many as 1,200 individuals may have been impacted, Farris said.

He added that this alleged scam was part of the nationwide sub-prime market failure that took place last year.

Set up to fail

The scheme was devised to take the life savings of victims, Farris said.

"People were set up for failure," Farris said of those caught in the scheme's web, with their loan documents being falsified to show they were making more money than was actually the case. In some cases, employment was also falsified, the detective said.

The way the home deals were explained to the victims, Farris said, the buyers thought everything was fine with their home purchases.

"Have you ever read every word of all the documents?" when buying a home, Farris asked, "Or do you trust the Realtor. Do you trust the people at closing? The title company is supposed to be looking out for you."

But in this case, the title company was allegedly part of the scam, with American Value Homes, Mortgage Processing Services and Value Title all operating under the same roof, Farris explained.

Some people would come in with their own financing, "and they would be fine," but if someone walked in the door looking to get financing with zero down and 100 percent financing, they were referred to McMahan, who owned Mortgage Processing Services, Farris explained.

"There were no outside checks and balances," Farris said of the alleged operation.