The Winston-Salem journal reports that the Associated Press said that Greg Smith, a Charlotte-area homebuilder was sentenced to more than two years in prison for his role in a mortgage-fraud scheme that the government said cost lenders $3.7 million. Smith was sentenced Wednesday by Judge Graham Mullen of U.S. District Court, who said that the prison term was "necessary to reflect the seriousness of the offense."
Smith pleaded guilty in September 2004 to three counts of mortgage fraud after a federal investigation showed that he and more than 12 real-estate professionals conspired to inflate the selling prices of homes in subdivisions near Lake Norman, north of Charlotte. The government alleged that Smith participated in 78 such deals.
Smith’s attorney, James Wyatt, asked Mullen for leniency, saying that his client’s role in the deals was minor. "Your honor, I’m very sorry," Smith told the judge in a soft voice. "I accept full responsibility for my wrong." But Mullen responded that the fraud couldn’t have taken place without Smith’s participation.
Smith, who has left the homebuilding business, is the first of at least 11 people who have pleaded guilty in the case to be sentenced. A federal prosecutor said Wednesday that there could be more indictments, based on Smith’s cooperation. Smith built homes in the McKenzie Place and Glenridge subdivisions in Cornelius, where residents told The Charlotte Observer in 2003 that their property values had dropped dramatically after suspicious sales and a string of foreclosures.
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Participants in the fraud then exaggerate appraisals, income statements and other documents to persuade lenders to grant a loan for far more than a house is worth, and more than the buyer can afford. Once the excessive loan is granted, the seller gets his price and the con artists pocket the difference. The buyer gets the house, an upfront payment and mortgage payments he can’t afford - eventually leading to a foreclosure.