CUMIS Says Mortgage Fraud Precludes Bankruptcy Discharge
SPRINGFIELD, Ill. – CUMIS Insurance Society is asking a federal bankruptcy court to block an effort by a former senior loan officer of Staley CU, who filed for bankruptcy while she was on her way to prison for a mortgage fraud, to discharge $1.6 million in restitution she owes the credit union insurer.
CUMIS told the U.S. Bankruptcy Court for the Central District of Illinois last week that the restitution order against Diane Shelton, 63, should not be discharged under her Chapter 7 filing because she incurred the debt as part of her legal plea in a $3 million mortgage fraud that cost the Urbana, Ill., credit union as much as $1.6 million in losses.
As part of last October’s court case, Shelton and Mark Brown, a former licensed real estate appraiser with whom she conspired, were sentenced to prison and ordered to pay restitution. A third conspirator, Terry Hart, the owner of Hart Realty in Decatur, committed suicide the day he was scheduled to be sentenced.
The trio used fraudulent appraisals prepared by Brown to cause buyers to purchase and Staley CU to finance residential real estate properties owned by Hart and financed at amounts substantially higher than their expected values between 2002 and 2005. The loans were made to unsophisticated borrowers, most of whom eventually defaulted. Hart and Shelton also received payment of loan proceeds and kicked back payment to Brown through appraisal fees. The loans totaled $3 million, of which $600,000 went to Hart.
CUMIS has paid almost $1.7 million in claims so far to Staley CU.