MOBILE, Ala. – A women who helped her brother tap into First Educators CU and several other lenders for millions of dollars in mortgages was convicted by a state jury Friday of fraud in the scheme.
Melissa Gulledge was convicted of acting as a “straw buyer” for four of the dozens of properties involved in the scheme. Gulledge signed documents saying she was responsible for the mortgages and the downpayments when in reality she was signing for her brother Lance Collins, who secretly put up the funds. Collins pleaded guilty in the case and is awaiting sentencing.
Under the scheme the conspirators funded the home loans to rehabilitate condominiums at the Gulf Shore resorts with undisclosed second mortgages that sucked the equity out of the properties.
To make the deals work, Gulledge negotiated seller-financed second mortgages, in which she agreed to make monthly payments directly to the sellers of the condominiums for a portion of the sales price. This would allow her to walk away from the closing table with tens of thousands of dollars more than her down payment.
The sellers often received only a small number of payments and that the mortgage companies ultimately foreclosed on the properties. Numerous sellers have filed lawsuits.
Gulledge kept the second mortgages secret from First Educators, which loaned money to her for each of the four purchases cited in the indictment. John Wheeler, the credit union’s vice president, testified that his credit union would not have approved the loans had it known about the second mortgages.
Gulledge earned at least $550,000 from the scheme, which she sent back to Collins, who started Tradestone Industries and Alabama Coastal Renovations with the idea of buying, renovating and then reselling condos for a profit. He testified that he used money generated by the second mortgages to pay for renovations and additional condo purchases.
A prominent local realtor, her son and daughter-in-law and two others, including Collins, have already pleaded guilty to the fraud. Other lenders victimized by the scheme were ABN AMRO, First Tennessee Bank, US Bank and First Choice Funding.
The realtor and other members of the conspiracy would arrange 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.
Collins and others working with him acquired dozens of properties in this way and succeeded in making profits for themselves and the sellers when the real estate market was on fire in from 2003 to 2005. But when the market cooled following Hurricane Katrina, Collins and the straw buyers found themselves unable to sell the properties and unable to make payments on the second mortgages.
The institutional lenders foreclosed on the properties and the sellers lost tons of money.
