Leader of San Diego Mortage Company Sentenced to 41 Months in Prison and Ordered to Pay More Than $500,000 in Restitution
|U.S. Attorney’s Office December 16, 2013|
Today United States Attorney Laura E. Duffy announced the sentencing of Brian Nels Peterson, the head of a mortgage company called Terra Finance in San Diego, California, for originating millions of dollars in fraudulent mortgage applications generated between 2005 and 2007, many for properties in two neighborhoods in San Diego County. District Court Judge John A. Houston sentenced Peterson today to 41 months in custody, ordered him to pay a $50,000 fine, and ordered restitution in the amount of $542,075 to Citi Mortgage.
Peterson admitted that he devised a scheme to procure mortgage funds through deceptive means, including falsifying income on applications to qualify borrowers for loans. Terra Finance facilitated loans in several San Diego neighborhoods, including the expensive then-new Ivy Gate housing development in North County’s 4S Ranch and the Rolling Hills development in southern San Diego County. Court documents indicate that in its heyday, Terra Finance generated between $80 million and $100 million worth of residential mortgage loans. Peterson, who held a broker’s license with the California Department of Real Estate, personally signed most of the fraudulent loan applications containing false income, employment, asset, and liability information submitted under his license number.
Peterson earned over $1 million from his fraudulent loan business through broker’s fees, kickbacks from cash-out refinances, and other sources in 2006 alone. He admitted that he failed to report his over $1 million income in 2006 and that he evaded paying taxes by arranging to be paid in cash and other means.
According to court documents, Peterson orchestrated the fraudulent conduct of employees, borrowers, and industry professionals as the head of Terra Finance. Peterson recruited a cadre of loan officers, loan processors, office staff, real estate “investors,” and other industry professionals to participate in his scheme, including appraisers, tax preparers, and lender representatives. These knowing participants included people who made up job titles and income figures so borrowers would appear to qualify for a loan, added borrowers to another person’s bank account, and then had the borrowers falsely claim the funds in the account as assets, fabricated false “verifications” of phony information in the loan applications, and prepared appraisals “to order” based on the property value Peterson sought. Borrowers used a succession of fake loan applications to purchase multiple properties that they could not afford. The initial loans were often re-financed—through fraudulent loan applications—to fund additional purchases in an upward spiral of home ownership built on a foundation of fraud.
Peterson’s real estate empire eventually crumbled, resulting in millions of dollars of losses, dozens of foreclosures, numerous neighborhoods depressed—and the indictment of 26 loan officers, loan processors, appraisers, borrowers, and a lender representative, all who participated in loans with Terra Finance. In a related case, United States v. Berkenfield, case number 11CR3486-JAH, 13 out of 25 arrested defendants have pled guilty and have been sentenced to penalties ranging from probation and home confinement to five months in custody. Twelve defendants remain pending in that case. (One defendant remains a fugitive.)
Defendant Criminal Case No. 11CR3486-JAH:
Brian Nels Peterson
Count one: wire fraud (Title 18, United States Code, § 1343): 41 months custody; three years of supervised release; $50,000 fine; $542,075 restitution; $100 special assessment.
Count two: willful failure to file tax return (Title 26, United States Code, § 7203): 12 months custody; one year of supervised release, $10 special assessment, all to run concurrently with count one.
- Department of Homeland Security, Immigration and Customs Enforcement, Office of Professional Responsibility
- Internal Revenue Service-Criminal Investigations
- Federal Bureau of Investigation