When it comes to mortgage fraud, Houston is no different than any other major city.

Brownstone Construction Owner Melvin Lendall Brown was indicted in early September on wire fraud allegedly associated with a mortgage fraud scheme involving several million dollars.  The previously sealed 16-count indictment was unsealed and announced on September 3 by U.S. Attorney Tim Johnson and Richard Powers, FBI Special Agent in Charge.

The Houston business owner, Brown, 49, allegedly committed fraud related to a scam to defraud home lenders of around $5 million in loans to buy homes in the Houston area.  Brown voluntarily surrendered to the FBI and appeared in court for the indictment.  Magistrate Judge Calvin Botley ordered the business owner released on a $100,000 bond, but Brown only had to come up with 10 percent of that amount.  Arraignment was set for later in the month.

Brown allegedly defrauded borrowers, inflated income of borrowers, falsified loan documents and settlement statements, misstated debts and liabilities, provided sham lease agreements, … well, what Brown didn’t do would make a shorter list.

Mr. Brown, however, incorporated some crafty antics a little off the beaten path of most industry fraudsters.  His scheme was somewhat complicated and involved lots of deception.

His alleged plan went like this.  He lured in people with good credit to act as borrowers.  They would submit applications for residential loans to buy homes in the Houston area, with full agreement that the borrowers would not pay on the note.  Instead, he had each borrower agree to allow him to buy the property in the borrower’s name.  Brown would make payments or find renters to live in the home and make the payments.  He would compensate the borrower for the home over a period of time and transfer ownership to himself.

After obtaining the borrower’s full agreement of the aforementioned actions, Brown submitted fraudulent loan applications overstating the borrower’s income and assets, understating or omitting debts and liabilities; misrepresented that borrowers leased the homes in which they resided and received rents from their current homes; and falsely claimed that the intended borrowers would use the newly bought homes as their primary residences.  Lenders based their approval and funding of the loan on all the previous information.  In submitting the fraudulent loan applications, Brown submitted/caused to be submitted fake documentation, including fraudulent employment information and sham lease agreements.

In addition, at the closings of the homes, Brown was responsible for title companies disbursing fraudulently-initiated loan proceeds, including to his own company, Brownstone Construction.  He misrepresented to the title companies that his company was hired to perform renovations for the properties; although, Brown never performed any renovations nor did he hire others to do work on the properties.  According to the indictment, Brown was paid in excess of $500,000, which he used for expenses unrelated to the purchased properties.

If convicted, he could face up to a maximum sentence of 20 years for each count of wire fraud and a fine up to $250,000.  The alleged fraud occurred from June 2004 through the following year.

An indictment is only a formal accusation of breaking the law.  Brown is presumed innocent until or unless he is convicted through the court system.