Mortgage Daily

Published On: March 10, 2009
Net Branch Manager ArrestedStacy Lynn Chamberlain accused of mortgage fraud

March 10, 2009

By staff

The Virginia branch manager of a Pennsylvania-based mortgage company was arrested for lying about her income on her mortgage application with a failed subprime lender.That executive, Stacy Lynn Chamberlain, turned herself in today following a March 3 indictment alleging that she falsified her income on a loan application with Fremont Savings and Loan, acting U.S. Attorney Dana J. Boenta reported in a press release today. The indictment was unsealed today.

Fremont General Corp., which filed for Chapter 11 bankruptcy in June 2008, abandoned residential lending in March 2, 2007, after receiving a cease-and-desist order from the Federal Deposit Insurance Corp. The bank’s operations were sold to CapitalSource Bank in July 2008.

Chamberlain, 42, faces one count of bank fraud, 18 counts of wire fraud and one count of interstate transfer of money taken by fraud. She faces up to 360 years in prison and up to $5.3 million in fines.

She manages the Richmond, Va.-branch of Gateway Funding Diversified Mortgage Services.

Chamberlain allegedly utilized a straw buyer to purchase a $489,900 Maryland property in 2004 with no money down. Fremont funded a $440,910 first mortgage and a second lien for $48,990. Credit and financial problems prevented Chamberlain from obtaining the loan legitimately.

Because the unnamed straw buyer — who was referred to as “RLS” — also had her own financial difficulties, Chamberlain allegedly created fraudulent income and employment documentation that elevated the straw buyer’s creditworthiness to “A+ level.” The higher rating ensured Fremont would not scrutinize the file as closely.

Based on the fraudulent files, Fremont approved both mortgages, the U.S. attorney said. The first mortgage was then sold to Deutsche Bank, and the second mortgage was acquired by CitiFinancial.

But Chamberlain quickly defaulted on the mortgages, which subsequently fell into foreclosure.

In all, the government claims five mortgage companies and various investors had $1.4 million in losses as a result of the mortgage fraud by Chamberlain.

Chamberlain is also accused of lying about her loan production and performance as well as her academic credentials in order to obtain her employment with Gateway and partnership relationships in the mortgage field. She also allegedly stole “substantial funds” that were provided to her as part of those relationships.

This isn’t the only recent legal problem that has hit Gateway, which was founded by former Mortgage Bankers Association Chairman Regina M. Lowrie.

In December, the Horsham, Penn.-based branch operation agreed to a $2.9 million settlement with the Federal Trade Commission over allegations it charged blacks and Hispanics higher interest rates and bigger up-front fees than non-Hispanic whites. However, because Gateway couldn’t afford to pay the full settlement amount, the FTC agreed to suspend all but $0.2 million of the amount.

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