Loan Officer Sentenced to 21 Months in Prison for Mortgage Fraud Scheme

PITTSBURGH—A resident of Allegheny County has been sentenced in federal court to 21 months of incarceration followed by two years of supervised release on his conviction of wire fraud conspiracy, United States Attorney David J. Hickton announced today.

United States District Judge Joy Flowers Conti imposed the sentence yesterday on Constantino Papastergous, 40, of Allison Park, Pa. Judge Conti’s sentencing order also requires Papastergous to repay more than $1,000,000 in restitution.

According to information presented to the court, Papastergous was a loan officer for Steel City Mortgage, which was a mortgage broker company. Papastergous and other individuals associated with Steel City Mortgage used Kenneth Cowden, an unlicensed appraiser who submitted fraudulent appraisals using the names of licensed appraisers, to prepare more than $85 million of fraudulent appraisals for Steel City Mortgage. The appraisals were fraudulent in that they falsely represented that they were prepared by a licensed appraiser and because they overstated the value of the property serving as collateral for the loans. Papastergous and other individuals associated with Steel City also submitted loan applications and supporting documents that misrepresented the financial status of the borrowers, including their income and assets.

Assistant United States Attorney Brendan T. Conway prosecuted this case on behalf of the government.

U.S. Attorney Hickton commended the Mortgage Fraud Task Force for the investigation leading to the successful prosecution of Papastergous. The Mortgage Fraud Task Force is comprised of investigators from federal, state, and local law enforcement agencies and others involved in the mortgage industry. Federal law enforcement agencies participating in the Mortgage Task Force include the Federal Bureau of Investigation; the Internal Revenue Service - Criminal Investigation; the United States Department of Housing and Urban Development, Office of Inspector General; the United States Postal Inspection Service; and the United States Secret Service. Other Mortgage Fraud Task Force members include the Allegheny County Sheriff’s Office; the Pennsylvania Attorney General’s Office, Bureau of Consumer Protection; the Pennsylvania Department of Banking; the Pennsylvania Department of State, Bureau of Enforcement and Investigation; and the United States Trustee’s Office.

Mortgage industry members with knowledge of fraudulent activity are encouraged to call the Mortgage Fraud Task Force at (412) 894-7550. Consumers are encouraged to report suspected mortgage fraud by calling the Pennsylvania Attorney General’s Consumer Protection Hotline at (800) 441-2555.