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Mortgage Fraud Scheme Lands Real Estate Developer Behind Bars

Posted by on Thursday, June 20th, 2013

Brooklyn U.S. Attorney Loretta Lynch recently announced the arrest of a New York real estate developer for his participation in a long and torrid mortgage fraud scheme. Schelton Assoumou, owner of Brooklyn Renaissance Development Inc., was taken into custody on January 15 and appeared later that same day before United States Magistrate Judge Robert M. Levy. He is charged with both bank and wire fraud.

Loretta Lynch

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Details of the Mortgage Fraud Scheme

From June 2008 through June 2012, Assoumou allegedly claimed he was a successful real estate developer. He told potential clients he was the President of Renaissance Development Inc. and sold real estate around the Brooklyn area as investment properties. As a result, Assoumou was able to sell three multi-family homes, including one that he sold to a fellow Harvard alumni.

In an attempt to alleviate any concerns or conflicting interests, Assoumou told potential investors that he could easily manage real estate properties on their behalf. He even offered to collect monthly rent payments from each tenant, making that one less thing the investors would need to worry about. Assoumou not only offered to collect rent from the tenants, he also told the investors that he would manage the properties, recruit tenants and make mortgage payments on their behalf after collecting rent money. Assoumou essentially convinced his clients that, once they invested with Renaissance Development, they would have very little involvement in the day-to-day operations of the properties.

While Assoumou’s pitch sounded good, it was far from truthful. Assoumou, who is a 2005 Harvard Business School graduate, was not “managing” the investment properties at all. He was making little, if any, effort to keep the properties up and in acceptable running order. Although Assoumou did manage to collect monthly rent payments from each tenant, he failed to make timely mortgage payments as he had promised investors. As a result of non-payment, each of the mortgage loans Assoumou obtained for investors ended up in default. The total loss to mortgage lenders was approximately $2 million. Among those financial institutions defrauded in the scheme were Fannie Mae and Freddie Mac.

According to Federal Housing Finance Agency Inspector General Steve A. Linick, “The complaint alleges a scheme to defraud in which home mortgage lenders, among them Fannie Mae and Freddie Mac, lost millions of dollars as a result of Schelton Assoumou’s activities. My office is committed to prosecuting such fraud schemes to the fullest extent under law.”

Fannie and Freddie

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 Additional Mortgage Fraud

In addition to defrauding his investors, Assoumou also submitted fraudulent information to lenders on each of the mortgage loan applications. In order to qualify for certain federally funded mortgage loans, certain requirements must be met by the applicant. In this case, the mortgage applications were each allegedly filled out by Assoumou and contained a number of lies and half-truths concerning the borrowers. For example, a mortgage loan applicant is required to provide the lender with an approximate current balance of their bank account. This helps to verify the applicant’s income and overall ability to repay the mortgage loan. Assoumou allegedly misrepresented one borrower’s bank account balance, inflating the actual balance by hundreds of thousands of dollars.

In addition to providing inflated bank information, Assoumou also made false claims to mortgage lenders about who would live at the properties. In order to receive certain federally backed loans, a borrower is required to be the sole occupant of the property. In order to fraudulently obtain the mortgage loan, Assoumou not only told lenders each applicant would be the sole occupant of the properties, he also provided lenders with bogus documentation to support the claims.

If Assoumou is convicted on each of the charges, he faces a maximum sentence of 30 years in prison, along with paying restitution and fines of up to two times the loss of each victim affected by the mortgage fraud scheme.

Number of Mortgage Fraud SARs

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“As alleged in the complaint, Schelton Assoumou purported to run a real estate development business that invested in the revitalization of the Bedford-Stuyvesant neighborhood in Brooklyn. Instead, his goal was to fleece investors and lending institutions alike, using false promises and fraudulent documents to carry out his scheme. Assoumou engaged in the very type of fraud that contributed to the recent collapse of the housing market,” said United States Attorney Loretta Lynch. “Those who engage in such conduct will be vigorously investigated and prosecuted.”

 

If you have discovered evidence of government fraud, contact an experienced False Claims Act attorney before blowing the whistle. You may be entitled to a substantial reward and the legal protections afforded to whistleblowers under state and federal laws. The attorneys of Berger & Montague are nationally recognized experts in Whistleblower/Qui Tam actions with over a decade of experience pursuing these complex fraud cases. For more information or to schedule your confidential consultation, contact us online or call us at 1-800-424-6690.