West Michigan Mortgage Fraud Case Results in ChargesContact: John Sellek or Matt Frendewey 517-373-8060
August 13, 2009
LANSING -Attorney General Mike Cox today announced that three individuals have been charged in connection to a mortgage fraud ring operating in West Michigan. Grand Rapids resident Damon Clark and Ferndale resident Reginald Tardy, Jr. are in custody after being charged with eight counts of perpetrating mortgage fraud in connection to six Grand Rapids properties. Former Grand Rapids resident Brian VanFarowe was also charged but has fled the country.
"Mortgage fraud hurts all of us through declining home values and a damaged financial system," said Cox. "But this case is especially disturbing because they targeted people who did not understand the process, creating a financial disaster while pocketing thousands for themselves."
During 2005, it is alleged that mortgage loan officers Tardy and Clark and real estate investor VanFarowe conducted a mortgage foreclosure scam that targeted the Hispanic community in Grand Rapids. The targeted buyers often spoke or wrote little English and had a limited understanding of the mortgage process.
Promising them a piece of the American dream, Tardy and Clark prepared loan documents for the buyers with falsified financial information to ensure a mortgage could be obtained. The pair of loan officers acquired generous assessments for VanFarowe's properties and used the falsified loan applications to secure mortgages for the buyers which were higher than the actual property value.
At the closings, VanFarowe presented invoices alleging that legitimate services had been rendered by T.Dot Financial, a company owned by Tardy and Clark. These invoices were fraudulent because they were kick-backs to the loan officers for finding a buyer and getting the fraudulent loan application approved. Because VanFarowe did not object to the invoice, the mortgage company permitted payment from loan proceeds. As loan officers, Tardy and Clark had a duty under law to remain at "arms length" in arranging mortgage applications. They used the fraudulent invoices to hide the fact that they personally benefited from the inflated sale and fraudulent mortgage applications.
As a result of the scheme, the buyer ended up owning property with a mortgage greater than the actual value of the home, while Tardy, Clark and VanFarowe illegally walked away with thousands of dollars. The buyer, who's loan application was based on false income information, did not have the financial means to pay the mortgage and ended up in foreclosure.
Tardy, Clark, and VanFarowe are all charged with the following:
· One count of racketeering, a 20 year felony.
· One count of conspiracy to obtain a loan by false pretense, a 10 year felony.
· Two counts of obtaining money by false pretense, more than $20,000, a 10 year felony.
· Four counts of obtaining money by false pretense, less than $20,000, a five year felony.
Tardy and Clark were arraigned 64B District Court in Montcalm County. Bond for each defendant was set at $250,000, cash or surety. A pre-exam conference is scheduled for Tuesday, August 25, 2009.
The Attorney General's office began investigating this scheme after receiving a referral from the Office of Financial and Insurance Regulation.
"I would like to thank the Office of Financial and Insurance Regulation as we continue working together to tackle mortgage fraud in the State of Michigan," said Cox.
Attorney General Cox has made prosecuting mortgage fraud a priority for his office. In 2008, Cox created a mortgage fraud unit, teaming up with the Michigan State Police and other law enforcement agencies to tackle the problem. These defendants are the 21st person or company charged with a mortgage fraud-related offense by the Attorney General in the last 12 months. Cox's office has also held several mortgage foreclosure forums to help families stay in their homes during these difficult times.
A criminal charge is merely an accusation and the Defendant is presumed innocent unless proven guilty.