Mortgage Executive Sentenced to 33 Months for Mortgage Loan Fraud

RICHMOND, VA—Nicole G. Hathaway, 34, of New Kent, former president of Mortgage Solutions II, was sentenced today to 33 months in prison for her involvement in a two-year mortgage loan fraud.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia; Kenneth R. Taylor, Jr., Special Agent in Charge of HUD’s Office of Inspector General Capital Region; Keith Fixel, the Inspector in Charge of the Charlotte Division of the Postal Inspection Service; and Michael F.A. Morehart, Special Agent in Charge of the FBI’s Richmond Field Office, made the announcement after sentencing by United States District Judge James R. Spencer.

Mortgage Solutions II was a Virginia limited liability corporation involved in the origination and brokering of mortgage loans. Through court documents, Hathaway admitted that in order to obtain loan commissions, she attempted to obtain nine different fraudulent real estate mortgage loans in amounts totaling over $1 million. The sophisticated scheme defrauded Freedom Mortgage, based in Mount Laurel, New Jersey; Washington Mutual Bank, based in Seattle, Washington; CitiMortgage, based in O’Fallon, Missouri; New South Federal Savings Bank, based in Birmingham, Alabama; the Federal National Mortgage Association, known as Fannie Mae; and the Federal Home Loan Mortgage Corporation, known as Freddie Mac. One of the nine attempted loans was refused. The total loan losses on the other eight approved loans were approximately $568,293.

Documents show that the scheme involved overstating the creditworthiness of the buyers and inflating the value of the properties. The scheme had a number of knowing participants, including a loan originator, a realtor/investor, buyers, property sellers, and others. The conspirators fraudulently orchestrated real estate deals with mortgage loans wherein the buyers’ creditworthiness was mischaracterized in two ways. In the application phase, the conspirators would find a borrower to participate in the scheme and then make false statements on the mortgage loan application for such items as employment, income, and assets to inflate the borrowers’ creditworthiness. Because the borrowers typically did not have sufficient assets to even make a down payment or pay closing costs, the conspirators inflated the purchase price so that the seller or others could secretly make the payments with the proceeds of the loan.

In the settlement or closing phase of the fraud, Hathaway and co-conspirators would create false backup documentation to “corroborate” that the buyer had paid the down payments and closing costs. This caused the settlement agents to falsely state on the HUD-1 Settlement Statements that the buyers had paid the down payments and closing costs. The end result was that the buyers’ creditworthiness was overstated and the value of the property was inflated.

The case was investigated by HUD’s Office of the Inspector General, the United States Postal Inspection Service, and the FBI’s Richmond Division. Assistant United States Attorney David T. Maguire is prosecuting the case on behalf of the United States.

A copy of this press release may be found on the website of the United States Attorney’s Office for the Eastern District of Virginia at www.justice.gov/usao/vae. Related court documents and information may be found on the website of the District Court for the Eastern District of Virginia at http://www.vaed.uscourts.gov or on http://pacer.uspci.uscourts.gov.