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Newport coast man sentenced for mortgage fraud

April 6, 2010 12:00:00 AM PDT
A Newport Coast man has been sentenced to five years in prison for his role in a mortgage fraud scheme.Lorenzo Espinoza, 43, was sentenced by U.S. District Court Judge Stephen V. Wilson.

The judge ordered Espinoza to pay $614,000 in restitution.

Espinoza pleaded guilty in December 2006 to conspiracy to defraud the department of Housing and Urban Development, two counts of bankruptcy fraud, one count of money laundering, and one count of willful failure to pay tax to the Internal Revenue Service.

Espinoza admitted that he engaged in a scheme that ran from April 1995 until May 2001 and caused HUD to suffer major losses when he and his associates fraudulently purchased nearly 100 residential properties.

The properties were sold at inflated market values to unqualified buyers who were unable to make payments on the homes.

Espinoza says he and his associates supplied the down payments for the buyers, and in some cases obtained bogus tax forms and paycheck stubs that were submitted with the loan applications.

When the buyers defaulted on the home loans, and the lenders foreclosed on the properties, HUD reimbursed the lenders for their costs and took possession of the properties.

It's estimated the scheme cost HUD $2 million dollars.

Judge Wilson rejected a request for leniency, saying the case was marked by "extreme greed."