Two northwest suburban men were charge with fraudulently controlling property appraisals in a scheme to defraud lenders.
Steven L. Garcia, a 45-year-old Schaumburg resident, and his 43-year-old brother, Michael R. Garcia of Streamwood, operated American Financial Mortgage Services Inc., a Schaumburg-based licensed mortgage brokerage, according to the U.S. attorney’s office.
The duo fraudulently caused lenders to make mortgage loans brokered by their company by falsely representing that the supporting property appraisals were performed by independent appraisers, the U.S. attorney’s office said. Instead, the brothers and their employees were selecting and paying the appraisers, managing the appraisal process and influencing property valuation.
Mortgage brokers are prohibited by Federal Housing Administration regulations from having substantive communications with appraisers about property valuations, according to the U.S. attorney’s office. The regulations also prohibit mortgage brokers from ordering or managing and appraisal assignment and paying appraisers.
The Garcia brothers allegedly bypassed these regulations by controlling Residential Appraisal Management Company Inc. through a nominee, according to the U.S. attorney’s office. They used the company to steer appraisals to hand-picked appraisers.
One of the hand-picked appraisers was a relative who gave an appraised value sufficient to support a proposed loan, while falsely representing to lenders that Residential Appraisal Management Company Inc. selected appraisers based on experience and skill, the U.S. attorney’s office said.
The Garcias also fraudulently caused lenders to make mortgage loans to finance fraudulent real estate transactions in which the brothers and their nominees bought and re-sold homes at inflated prices to unqualified nominees who then defaulted on the loans, the U.S. attorney’s office said.
The brothers gave lenders false employment and income information to support the nominees’ loan applications and then gave the nominees money to make the purchases, according to the U.S. attorney’s office. They fraudulently obtained about $1.9 million that was payed out at the closings of the fraudulent real estate transactions. Another $274,000 in commissions was obtained from those deals.
Each of the brothers was charged with one count of mail fraud and one count of wire fraud, according to the U.S. attorney’s office. Arraignments in federal court in Chicago have not yet been scheduled.