An Oak Park businessman was one of 21 people named in a federal indictment unsealed Thursday afternoon alleging a massive mortgage fraud scheme that cost banks $19 million. In a separate indictment, a former Oak Park resident was charged with defrauding several banks out of $2.5 million through the use of bogus buyers of houses, including a total of four in Oak Park and River Forest.
Donald J. Felton, 57, an accountant and tax preparer, was one of 21 people charged in Operation Malicious Mortgage. He charged with one count of conspiracy to defraud numerous financial institutions, as well as two counts of wire fraud. Prosecutors say Felton and others created a variety of false supporting documents intended to support false statements in loan applications regarding loan applicants’ income and financial status.
Among those documents were false verifications of employment, false accountant letters, false verifications of rent and leases and bogus tax returns. The documents were created and submitted, the indictment alleges, “for the purpose of inducing the lenders to issue loans to individuals who were not always qualified for the loans.”
Based on those fraudulent loan documents, banks issued mortgages totaling more than $95 million and lost approximately $19 million. Numerous homes were foreclosed and resold for amounts less than the outstanding mortgage loan balance, according to the indictment.
In a separate indictment, federal prosecutors say Jonathan Hon, a principal in Burnham Mortgage, Inc. used front men to purchase homes on the 200 block of Gale Avenue in River Forest, and three Oak Park houses on the 1000 block of South Kenilworth Avenue, and the 1150 blocks of South Wisconsin and Home avenues.
Hon did so, officials say, “well knowing that these individuals were not the true purchasers and would not make the loan payments.” Instead, Hon allegedly cashed checks totaling $570,000 in mortgage loans proceeds, and $1.9 million in title company checks intended to pay off lien holders, including various banks.
Hon operated one of his companies, Lucid Muse Corp., on the 1000 block of North Kenilworth Avenue until its dissolution in 2005.
Burnham Mortgage was involuntarily dissolved in Sept., 2002, according to the Illinois Secretary of State.
See the June 25, 2008 Wednesday Journal for more details.