Pennsylvania real estate company ran $2 million mortgage scam, U.S. says

November 11, 1990|By Mark Fazlollah | Mark Fazlollah,Knight-Ridder News Service

PHILADELPHIA -- To Tammy L. Williams and Lynda Murray, it seemed a deal they could not afford to pass up.

As it turned it out, it was a deal they could not afford. Period.

In 1984, they both were 21, working part-time jobs that paid only $3.10 an hour. But that didn't stop New Frontiers Real Estate agent John Porter from guaranteeing that they could get a $24,050 government-backed mortgage for a duplex in suburban Upland, Delaware County, Pa.

Mark Cain of Darby, Pa., was a restaurant dishwasher, earning $4 an hour. He was trying to support his daughter and disabled wife, barely making ends meet, but New Frontiers got him a $23,750 mortgage for the other half of the same duplex. Again, the loan was insured by the American taxpayers.

The real estate company never told Mr. Cain, Ms. Williams or Ms. Murray that a buyer -- who federal officials believe served as a "straw party" for New Frontiers in the deal -- had bought the entire duplex for $5,500 shortly before it was sold to them.

The company, they said, also failed to tell them that the rundown duplex needed immediate repairs, which would be hard for them to pay for on top of the mortgage.

Ms. Murray's, Ms. Williams' and Mr. Cain's names are on a long federal list of people who bought homes from New Frontiers and quickly lostthem in what U.S. government agents described as a $2 million mortgage scam orchestrated by the Upland company between 1984 and 1987.

Porter and three other New Frontiers brokers were sentenced to prison earlier this month after pleading guilty to conspiracy and filing false reports with the Department of Housing and Urban Development for government-insured mortgages in southern Delaware County.

James Meehan of Newtown Square, Pa., a title agent involved in New Frontiers sales, had been sentenced earlier to serve jail time.

Assistant U.S. Attorney Seth Weber said during sentencing that seven other people were targets of the FBI's continuing investigation. He said Keith Raport, who oversaw New Frontiers' operations throughout the period of the alleged criminal violations, was "the main target."

Mr. Raport, 34, of suburban Media, Pa., said in an interview that he expected to be indicted soon but that he would be found not guilty.

"The government has taken two and two and added them together and gotten five. My opportunity to give my side of the story will be at a trial, and that's going to happen," he said.

The government has charged that New Frontiers improperly brokered about 100 federally backed mortgages that ended in foreclosures, many of them only a year after the homes were bought. The buyers were often low-income workers who had never owned property before. Several said they were left with theirlives in tatters.

"I don't care about the money. I just want to clear my name," said Ms. Murray, who now works for a day-care center in Aston, Pa.

An FBI-HUD affidavit in the case said New Frontiers violated HUD regulations by exaggerating the incomes of prospective buyers or giving them under-the-table loans, all to enable them to qualify for insured mortgages.

According to the government, the typical deal worked like this:

New Frontiers would buy a house cheaply in the depressed Chester-area housing market, sometimes for as little as $5,000.

It would make minimal repairs, then find an unsophisticated buyer who would pay an inflated price. The federal mortgage guarantee obtained through falsified documents would persuade lenders to finance the deals.

Besides the profit it made on the sales, the government says, New Frontiers profited from the scheme by charging broker's fees on each sale.

At times, the government says, New Frontiers' profits were concealed by the use of "straw parties." The straw parties signed title forms to make it appear they owned the properties and had received the profits on the deal, thus concealing New Frontiers' role.

Because the loans were federally guaranteed, taxpayers' money was used to pay off the mortgages once the buyers defaulted; the amounts usually ranged from $20,000 to $40,000 per property.

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