The former owner of Buy-A-Home real estate brokerage, was convicted over the holiday of conspiracy to commit criminal bank fraud, criminal mail fraud and criminal wire fraud. Mitchell Cohen pled guilty to this mortgage fraud scheme on December 27, 2012 and is scheduled to be sentenced April 26, 2013 in United States Federal Court in New York. Cohen’s crimes carry a maximum penalty of 30 years in prison, although the Federal Sentencing Guidelines will be utilized in determining his ultimate sentence.
Cohen criminal mortgage fraud scheme involved pushing purchasers to buy houses they could not afford, causing them to default, and leaving the banks to deal with the bad loans. As part of his conspiracy, Cohen was accused of paying off debt of borrowers who otherwise would be ineligible for a home loan to make them appear more credit worthy, and then sell them a home for tens of thousands of dollars more than what his company paid. He encouraged purchasers to include false financial information on loan applications in an effort to get the loans approved. He was also accused of providing cash to purchasers who had no money in the bank, which allowed them to obtain certified checks in an effort to defraud the bank into believing they had seasoned funds to close. As further part of his conspiracy, he was accused of having friends and family of the purchasers sign affidavits saying they had paid off some of the purchaser’s debt, when in fact that was untrue.
Cohen’s scheme caused HUD to issue and banks to purchase, millions of dollars in bad loans based on fraudulent information. As a result, many of the houses went into foreclosure. This is the unusual case where a loan originator is successfully prosecuted for pushing bad loans on unsuspecting consumers. It is unclear whether any of the borrower’s involved in Cohen’s conspiracy were charged with any crime. It is typical for authorities to charge the borrower’s with mortgage fraud based on the fact that they participated in the fraud by providing false financial information.
Cohen was charged with a Co-Defendant, believed to be a business associate, whose charges remain pending. It has not been reported whether a part of Cohen’s agreement to plead guilty included a promise to testify against his Co-Defendant who is expected to go on trial in 2013.