MOBILE, Ala. – A prominent realtor who engineered a series of real estate frauds to pump up the value of Gulf Shore beach condominiums at the expense of lenders and buyers was sentenced yesterday to three years in federal prison and ordered to pay $5.2 million in restitution.
The three-year sentence was less than half the sentence faced by Joan Teeters, the 66-year-old owner of Joan T. Realty in Foley, as the judge agreed to take into account her failing health and recommended she be jailed at a medical facility to address her medical needs.
Teeters, her son and daughter-in-law and two others have pleaded guilty to a mortgage fraud that enabled them to buy expensive vacation homes at Alabama’s Gulf Shores using “straw borrowers” to qualify for loans mostly from nearby First Educators CU, but also from ABN AMRO, First Tennessee Bank, US Bank and First Choice Funding.
The conspirators arranged for a traditional mortgage while at the same time persuading owners of condominiums near the beach to extend special second mortgages, in which buyers would eventually pay a portion of the sales price directly to the seller—a practice known as equity stripping.
Teeters' son Jonathan Nattier and other straw buyers agreed to tender offers for the property and then used money provided by other members of the conspiracy for down payments. Straw buyers were promised a portion of the proceeds from subsequent sales, prosecutors said.
Credit unions and other lenders specifically forbid such “seller-financed second mortgages,” but Teeters admitted that the conspirators would direct the title company to prepare two different settlement statements using falsified HUD documents to conceal that fact. Phony, or “straw” borrowers would qualify for the loans using falsified loan documents that overstated income and listed assets they did not own.
When the real estate market collapsed the conspirators found themselves unable to keep paying the sellers, who got stuck with condos worth less than the mortgages. Many of them sued the title company, brokers and lenders.
U.S. Attorney Kenyen Brown said he hopes the prosecution will deter others from setting up shady real estate deals like these. “Over the past few years, financial institutions have experienced an increase in the volume and types of mortgage fraud schemes resulting in significant losses,” he stated. “Prosecutions of this nature, as well as the resulting conviction and sentence, should send a clear message to all those who would engage in such mortgage fraud schemes, that they cannot escape law enforcement scrutiny of their criminal conduct.”
