Texas Mortgage Scheme Uncovered, Nine Arrested

Authorities arrested nine individuals Tuesday in connection with an alleged Texas mortgage fraud scheme involving home loans made to unqualified mobile-home buyers.The homes and the lots they sat on were sold by Emerson Manufactured Homes, according to a federal indictment unsealed in the afternoon.

The Houston Chronicle reported last year that at least 190 of Emerson Estates’ estimated 285 homes had been foreclosed on since 2001.

Homeowners in Emerson Estates and other areas that Emerson sold homes in, such as Oak Hills, Crockett Trace and Pin Oak, claimed more than four years ago in a Montgomery County civil lawsuit that they were duped into buying overpriced mobile homes.

Many of the Texas home loan applicants ended up losing their homes to foreclosure and emerged from the situation with damaged credit.

The indictment alleges the nine conspired between April 2001 and June 2002 to advertise low mortgage rates and monthly payments to lure consumers to buy mobile homes from Emerson.

They were told they could qualify because Emerson owned the mortgage company, according to the indictment.

Many unsuspecting buyers attended a “pre-closing,” where they were given titles to the homes and land and where they signed liens indicating they owed Emerson or one of its companies for the property, according to the indictment.

This was allegedly done so fraudulent mortgage refinance applications with inflated appraisals could be submitted to the lender.

The mortgage refinancing allowed buyers with bad credit to be lured with the promise that they would not have to make down payments and that the closing costs would be rolled into the loan.

The proceeds from the mortgage refinance activity were then split among the schemers, officials say. The indictment also alleges the defendants:

1. Deposited money in buyers’ accounts so they could appear to have more assets and therefore qualify for a home mortgage loan.
2. Made buyers sign an “All Bills Paid” affidavit for debts they didn’t owe.
3. Used proceeds from sales to make loan payments for other borrowers.

ABN Amro, which funded almost 700 mortgage loans on homes sold by Emerson Manufactured Homes or other companies owned by Keith Raybon, made loans thinking they were refinances instead of purchase home loans, according to a lawsuit it filed in 2004 against Emerson, Raybon and others.

ABN Amro has since settled the case, said Charles Pignuolo, an attorney for the lending company. Eight persons were charged with a count of conspiracy to commit mail and wire fraud and 13 counts of wire fraud.

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