Two Fort Wayne men were sentenced to 21 months in federal prison this week after they pleaded guilty to participating in a mortgage fraud scheme.
In July, Johnny Stine, 40, and Ryan Webb, 32, pleaded guilty to making false statements in connection with a mortgage loan. On Thursday, U.S. District Judge Jon E. DeGuilio in South Bend sentenced each man to 21 months in prison and two years of supervised release.
They each must pay $585,000 in restitution – $159,548.15 to 1st Source Bank and $425,451.85 to the Department of Housing and Urban Development Financial Accounting Division Collections.
In late October, federal prosecutors charged a third Fort Wayne man with participating in the scheme.
Brian A. Edwards is accused of making false statements in connection with a mortgage loan and mortgage insurance. He has already filed a guilty plea in the case.
A licensed loan originator, Edwards knew Webb and Stine were using phony documentation to help low-income buyers qualify for mortgages.
Webb worked for Stine & Associates, owned by Stine. From 2008 to 2010, the two, and others, bought low-end homes in the Fort Wayne area, often using an entity called Sunset Properties of NI LLC, according to court documents.
Using advertising to target potential buyers and flip the houses, the group sold the homes for prices two to three times what they had paid for the properties. But many of the buyers were of very modest financial means and could not qualify on their own for the mortgages or federal mortgage insurance on the loans through the Federal Housing Authority, according to court documents.
So Webb and Stine, with the help of others unnamed in court documents, would provide money to the buyers to cover the loan closing costs, preparing phony gift letters seeming to show the money had come from the buyers friends or family members, according to court documents.
They would also set up a series of sham transactions, using temporary bank deposits, to make it appear the buyers had access to money they did not.
Sometimes, Webb and Stine used fake bank account screenshots in an effort to document assets in buyer bank accounts, according to court documents.
But because the borrowers could not actually qualify for these loans, they often defaulted and the properties went into foreclosure, according to court documents.
Court documents outline three different properties in which the two men committed the detailed scheme: 5019 Devonshire Drive and 5916 Abbott St. in Fort Wayne, as well as 1117 Summit St. in New Haven.
After each sale, Stine & Associates received a commission, and Sunset Properties received an escrow check for the sale of the houses, according to court documents.
In two of the three cases, the houses had significant mechanical or structural problems unknown to the buyers because they were cosmetically fixed, according to court documents.
The investigation into the mortgage fraud scheme was conducted by the Department of Housing and Urban Development Office of Inspector and the FBI Fort Wayne Mortgage Fraud Task Force, which is made up of FBI agents and Indiana State Police officers.