Two attorneys, an appraiser and two others have been indicted for their roles in a New York mortgage fraud ring that operated for years and netted more than $1 million by preying on first-time home buyers and institutional lenders, according to New York Attorney General Eric T. Schneiderman.

The five defendants allegedly bilked consumers by advertising a rent-to-own opportunity where first-time home buyers with low credit were given the chance to buy their own homes with no down payments and no closing costs. The defendants then took out fraudulent loans against those properties, conned lenders into believing they were paying off underlying mortgages, and then pocketed the money.

The 19-count indictment, unsealed Wednesday in Onondaga County (N.Y.) Court, charges attorney Theresa Sanders, a/k/a Theresa Hayes, 55, of Westerville, Ohio, and mortgage loan processor Tracie Clark, 41, of Wimauma, Fla., with Residential Mortgage Fraud in the Second Degree, a class C felony; five counts of Grand Larceny in the Second Degree, also class C felonies; three counts of Grand Larceny in the Third Degree, class D felonies; two counts of Scheme to Defraud in the First Degree, class E felonies; and eight counts of Falsifying Business Records in the First Degree, also class E felonies.

Clark on Wednesday was the final defendant arraigned. The other four defendants were arraigned last week. Judge Anthony F. Aloi set bail for Sanders at $250,000 cash/bond. Also charged in various counts of the indictment were attorney Michelle Powers, 51, of DeRuyter, N.Y., appraiser Steven Essig, 60, and Paul Sakowski, 44, both of Syracuse, N.Y.

The investigation revealed an elaborate scheme with Sanders purchasing dozens of dilapidated homes in and around Syracuse from the U.S. Department of Housing and Urban Development. She had some of them appraised for more than what she paid. After paying for the properties, Sanders then took mortgages out on each of the homes, usually in the names of her family members.

Armed with a new round of appraisals valuing the homes at unjustified values, the defendants applied for what they told lenders were refinance loans in the names of the prospective buyers, despite the fact that these buyers had never before owned the homes they were refinancing. Lenders, believing they were paying off underlying mortgages, wired closing funds to accounts controlled by the defendants, who then pocketed the money.

At the closings, buyers were surprised to learn that they would carry not one mortgage, but two - the second, which was not previously disclosed to them, was controlled by the defendants and varied in amounts up to more than $18,000. Believing they had no choice, buyers acquiesced to the "second mortgages" in hopes that they would be able to move forward as new homeowners.

To prevent the crimes from being discovered, the defendants used various excuses to withhold from the buyers the deeds to the properties, which caused the buyers to suffer numerous further hardships stemming from their difficulties in demonstrating that they were the rightful owners of the properties.

If convicted, the defendants face up to twenty years in prison.

“This case has brought to justice individuals who, in their elaborate scheme, not only defrauded mortgage companies, but also victimized unsuspecting third parties looking to own their own homes," New York State Police Superintendent Joseph A. D'Amico said. "For years, the actions of these defendants hurt homeowners, businesses, and our economy."

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