Paula Nezat, 50, of Vermilion, Ohio, and Reda Maxie, 55, of Parma, Ohio, who owned and operated ATA Title, a Cleveland Ohio area title business, have been indicted by a federal grand jury earlier this week for their roles in a mortgage fraud scheme that allegedly ran from 2004 to 2006 and involved over $6.2 million in fraudulent loans.  

Nezat and Maxie have been charged with multiple counts of mail fraud in the scheme and likely face significant prison time if convicted.

In all, twelve individuals have been indicted in the scheme, including a property flipper who bought properties to be used in the scheme and then flipped them to the straw buyers at inflated prices; loan officers who recruited straw buyers, arranged for false documentation of those straw buyers' finances, and submitted fraudulent mortgage applications to lenders; a builder who vouched for false statements of incomes for the straw buyers by purporting to be their employer when this was not the case; two individuals that provided fraudulent down payment assistance; and several straw buyers.

A typical transaction worked as follows, according to the indictment:  a co-conspirator in the scheme would find and buy a derelict property on the cheap, usually in the name of a shell company set up for the purposes of the conspiracy.  A straw buyer would be then recruited to buy the property from the company, at an inflated price, as if the property had been rehabilitated, when in fact little to no improvements had been made.  The conspirators arranged for inflated appraisals to make the higher purchase prices seem legit to lenders.

Fraudulent mortgage applications were prepared for the straw buyers, which included false statements regarding the borrower's income, assets, and intent to live in the properties.  In some cases, the same individual who was selling properties to straw buyers was using other companies he owned to prepare false statements of employment and income for straw buyers.  Other co-conspirators purchased bank checks in the names of straw buyers, to fool lenders into thinking that these funds came from the buyers and were going toward the purchases of the property. 

Nezat and Maxie allegedly knew that the bogus down payments used to buy properties in the scheme did not come from the straw buyers.  Down payment funds were allegedly returned to those who had provided the funds at closing-- in most instances by Nezat and Maxie's ATA Title-- along with "profits" out of the funds provided by lenders.  Nezat and Maxie allegedly generated false HUD-1 settlement statements to make illegal distributions of funds to co-conspirators appear legitimate-- usually by distributing the money to shell companies operated by co-conspirators.  Those co-conspirators would then distribute payoffs to straw buyers and other co-conspirators.

In all, ATA Title conducted the title and closing work for 20 of the 27 allegedly fraudulent transactions mentioned in the indictment.