The former president of Iowa’s mortgage broker association has been convicted by a federal jury.
Paul Kramer was the owner of Kramer Mortgage Co., a mortgage brokerage. He also owned and operated Iowa Closing & Escrow.
Kramer, who lives in Granger, Iowa, additionally was the president of Iowa Association of Mortgage Brokers.
He was found guilty in U.S. District Court for the Southern District of Iowa on Wednesday of 18 counts of wire fraud and bank fraud, the Department of Justice announced.
Kramer’s accomplice, Lane Anderson, was also convicted by the same jury on two counts of conspiring with Kramer to commit bank and wire fraud.
Anderson founded a business in 2006 to purchase, renovate and re-sell residential properties. Kramer made short-term loans to Anderson to finance the investments and renovations.
But as the real estate market soured, demand for the properties evaporated and buyers couldn’t be found.
So the pair allegedly conspired to obtain multiple mortgages by deceiving lenders.
According to the government, Kramer and Anderson used a contractor who was a business partner of Kramer’s with a good credit score to qualify.
Loan applications reflected inflated income for the contractor, who only earned around $2,000 a month, and falsely stated assets, liabilities, source of down payment and source of income — among other things.
“Anderson and Kramer obtained the loans in rapid succession and used many different lenders so that no single lender would be aware of all the other loans being taken out at the same time,” the announcement states. “Kramer then had his closing company close the loans despite false notarizations and false closing documents.”
When all was said and done, 13 fraudulent loans for nearly $1.5 million had been obtained.
Kramer is also accused of misallocating trust funds at his closing company that were being held on behalf of lenders and borrowers. He allegedly took some of the funds for himself and misallocated other funds to cover the cost of running his mortgage company. Improper transfers for as much as $250,000 were made in a single month, and the final tally was in the millions of dollars.
While Kramer was initially able to repay the withdrawals fairly quickly, repayments slowed over time and a large deficit developed in the trust account. Deficits were covered with payoff proceeds from other transactions financed by US Bank. As the funds continued to be abused, borrowers were put at risk of foreclosure by US Bank.
Among the alleged victims was Iraq refugee Mohamed Rheem. In September 2009, proceeds from a loan used to finance a home purchase for Rheem — who had assisted the U.S. Army — were misallocated by Kramer. As a result, the previous loan that went unpaid landed Rheem in foreclosure proceedings for two years.
Another part of the government’s case is an alleged check-kiting scheme involving checks of up to $75,000 that were issued off of accounts that had as little $20.
Kramer and Anderson each face up to 30 years in prison at their March 2013 sentencing hearings.
