David B. Fein, U.S. Attorney for the District of Connecticut, has announced that Nathan Russo of Johnston, R.I. has been sentenced by Chief United States District Judge Alvin W. Thompson in Hartford to 30 months of imprisonment, followed by three years of supervised release, for his role in an extensive mortgage fraud scheme. According to court documents and statements made in court, between February 2007 and April 2010, Syed Babar of New London, Conn. orchestrated a scheme to obtain millions of dollars in residential real estate loans, including loans insured by the Federal Housing Administration (FHA), through the use of sham sales contracts, false loan applications, and fraudulent property appraisals. Chief Judge Thompson ordered Russo to pay restitution in the amount of $1,157,753.25.
Russo was a mortgage broker employed by Action Mortgage Corporation, a licensed mortgage broker in Cranston, R.I. Russo worked with Babar in brokering the loans, and he kicked back a portion of his mortgage broker fees to Babar as part of the fraudulent scheme.
In 2007, Russo acted as a mortgage broker for five residential properties, four of which were located in Connecticut, which were purchased by a straw buyer and co-conspirator. Russo prepared loan packages for these transactions, including loan applications for the buyer that he knew included false information about the buyer’s employment, assets and liabilities and the buyer’s intention to occupy the property as his principal residence. The loan applications also were supported by false documentation, including earning statements and fraudulent bank records. Contrary to Russo’s representations in the loan applications, he failed to interview the straw purchaser of four of the five properties. In an attempt to make it harder for lenders to discover the fraud, Russo brokered these five loans and used a different lender for each loan.
On the applications for three of the houses, Russo failed to disclose to lenders that the straw buyer had purchased other properties, notwithstanding Russo’s role as broker on them. For example, closings for two properties in Willimantic, Conn. took place on the same date, June 29, 2007, and neither of Russo’s applications disclosed the other loan being sought or the other property being purchased.
Babar and his co-conspirators conducted approximately 30 fraudulent mortgage transactions. As a result, various lenders suffered total losses of approximately $4.75 million.
A total of 13 individuals, have been convicted in connection with the scheme.
On Nov. 28, 2011, Syed Babar was sentenced to 120 months of imprisonment. Six other scheme participants have received prison terms ranging from 48 to 90 months.
