A Bowie man was sentenced to over three years in prison after pleading guilty to mortgage fraud charges.
Charles Donaldson, 58, devised a scheme that caused the issuance of over $4.7 million in fraudulent mortgage loans resulting in a $1.2 million loss of equity in the homes.
“Charles Donaldson promised to rescue homeowners who were behind in their mortgage payments, but instead he stole the equity from their homes and used it to buy his own house, “said U.S. Attorney Rod J. Rosenstein. “We are prosecuting mortgage fraud crimes thanks to the coordinated efforts of federal and state investigators.”
The case was investigated by the Maryland Mortgage Fraud Task Force. It was formed to provide early detection of mortgage fraud and enforce laws after mortgage fraud became a serious issue when Prince George’s County and other jurisdictions in the state were hit by the foreclosure crisis.
According to court documents, Donaldson along with Mary Dean, a loan originator who operated Sunset Mortgage Company from her home, began identifying homeowners who were having difficulty making payments on their homes and offered them a foreclosure “rescue” plan in 2005. He told them he would find outside
investors to buy those homes and rent them back to the homeowners.
The government says Donaldson never intended on making good with the homeowners’ money. He instead used it on personal things including a $169,000 home he bought using the funds.
The investors would pay the mortgage on the homes and receive a small percentage of the equity. The rest of the equity in the homes would go back to Donaldson. He then told them, he would hold that equity in escrow for a period of 12 to 18 months, when the homeowners would be in a better financial state to buy back their homes.
The investors in Donaldson’s scheme would be family members or friends. Donaldson created promissory notes that showed debts the homeowners owed to him. Equity in the homes was used as collateral. When loan companies disbursed funds to cover the liens he created, he pocketed the money for himself.
The new loans were made in the names of the investors, with higher payments and higher interest rates than the homeowners were paying. Dean, meanwhile, falsified information on the loan application making claims that the investors were using the homes as primary residents while overstating the income of the investors.
As a result of the process, neither the investors nor the original homeowners were able to afford the payments on the homes. The government says fourteen of the homes have already been foreclosed on with another two currently in foreclosure proceedings.
It was the kind of scam that federal, state and local government leaders are warning consumers about these days. Instead of participating in one of these scams, the Federal Trade Commission (FTC) says consumers should first contact their lender or loan servicer once they begin having trouble paying their mortgage. The FTC also recommends talking to certified credit counselors.
Dean has also pleaded guilty for her role in the scheme. She will be sentenced on March 22.