(source: USDOJ) KANSAS CITY, Mo. – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced today that a Greenwood, Mo., home builder has been indicted by a federal grand jury for a multi-million dollar mortgage fraud scheme.
Gary Bryan Penrod, 52, of Greenwood, was charged in a 22-count indictment returned by a federal grand jury in Kansas City, Mo., on Tuesday, March 8, 2016.
The federal indictment alleges that Penrod, doing business as Penrod Homes, Inc., engaged in a scheme to defraud mortgage lenders from May 2005 to June 2007. Penrod and others allegedly recruited buyers to apply for mortgage loans to purchase dozens of homes in Greenwood and Peculiar, Mo.
According to the indictment, almost all of the loans funded as part of the scheme defaulted and the properties were foreclosed upon, causing millions of dollars in loss. During the scheme, the indictment says, approximately 61 properties built and sold by Penrod went into foreclosure. Of these, illegal kickbacks allegedly were paid on 57 of the homes sold; the amount of the kickbacks totaled approximately $1.5 million and the losses to banks and/or mortgage companies associated with the 61 foreclosures was approximately $4.5 million dollars. However, a majority of these loans were not made by FDIC-insured financial institutions.
Penrod allegedly told prospective buyers that they would receive money back that could be used for closing costs, down payments, or mortgage payments. According to the indictment, this was concealed from the mortgage lenders, who were instead told that the buyers were using their own money. With the participation and aid of real estate or mortgage brokers, the indictment says, buyers caused false sales agreements, false loan applications, false supporting documents, and false settlement and closing documents to be submitted to the mortgage lenders. In many cases, the applications falsely overstated buyers’ incomes, assets and intent to actually live in the home. Penrod allegedly also caused settlement and closing documents to be submitted that falsely represented the terms of the proposed transactions, including the true purchase prices of the properties and the concealed kickback payments that were to be made.
Shortly after the sales, the indictment says, Penrod kicked back to the home buyer monies not reported on the sales or loan documents, which he called “builder rebates” or “share of profits.” Penrod delivered the checks himself, the indictment says, or he would have others deliver them, or have the buyer pick up the check from his office. The memo lines for these checks allegedly contained notations with phrases such as “consultation fee,” “fee,” “reimb.,” “Reimb Material,” “Materials” and “closing.” No consulting services were performed nor were materials cost paid or reimbursed, according to the indictment.
In addition to the kickbacks, Penrod allegedly made payments outside of the closing of commissions for the sales of the properties and finders-fees to individuals who brought in home buyers, which were not reported to the lender.
The federal indictment charges Penrod with 16 counts of wire fraud and six counts of mail fraud.
Dickinson cautioned that the charges contained in this indictment are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.
This case is being prosecuted by Senior Litigation Counsel Gregg R. Coonrod. It was investigated by the FBI.
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