Fraud aftermath: Mortgage firms to be repaid, not home buyers

The ringleader of a massive mortgage fraud scheme must pay $2.4 million in restitution to 15 mortgage and equity firms, according to federal documents.

However, the Bedford County families that were defrauded will have to file their own lawsuits if they want to see any of their money returned.

On Monday, William Thomas McMahan was sentenced to six and a half years in federal prison for bank fraud and money laundering and was ordered to pay $2,420,656 in restitution.

He will also have to serve three years of supervised probation, and must participate in 500 hours of substance abuse treatment. McMahan is currently free on bond and will surrender himself on Wednesday, Jan. 6, 2010.

McMahan, along with Roger Ritch, Carrie Snow and Jonathan Henderson, was charged in May with bank fraud and money laundering in a scheme involving hundreds of homes in Shelbyville. Bradley Aydelott was indicted on the same charges in July.

All have pleaded guilty to counts one and four of the indictment -- that they obtained financing under false pretenses and falsely represented the employment status and income of borrowers.

Assistant United State Attorney Gary S. Humble explained to the T-G Friday that federal law only allows the parties directly impacted, in this case, the mortgage firms, to receive restitution.

The families that lost their homes and the money they put down on them are considered "indirectly affected," Humble explained.

Humble said that the criminal case against the five was based on the lies that were told to the mortgage companies "who were directly defrauded."

If the victims of the scheme wanted to recover their money or collect damages, individual civil suits or a class action suit against McMahan, Ritch, Snow, Henderson and Aydelott would be required, the U.S. attorney explained.

According to federal documents, a total of 61 people who bought homes lost them through foreclosure as a result of the scheme.

Companies defrauded

According to the judgement, which was made available late Wednesday, restitution is to be ordered "joint and several" with McMahan and the other defendants, meaning that the plaintiffs in the case may recover all the damages from any of the defendants regardless of their individual share of the liability.

Only one of the mortgage firms to be repaid is located in Tennessee.

The list of restitution payees are:

* Wilmington Finance, Camp Hill, PA - $48,500

* First Franklin, Tarrytown, NY - $305,133

* American Mortgage Corp., Troy, IL - $33,466

* Mortgage Lenders Network, Middletown, CT - $76,400

* Ownit Mortgage, Cincinnati, OH - $490,730

* Long Beach Mortgage Co., Orange, CA - $89,361

* Decision One Mortgage, Charlotte, NC - $53,624

* Home Quest Capital, Alpharetta, GA - $102,435

* Peoples Home Equity, Mount Juliet, TN - $295,842

* Southtrust Mortgage, Athens, GA - $411,709

* RDC Mortgage, Santa Rosa, CA - $39,041

* Bank of American Home Loans, Countrywide Mortgage, Abilene, TX - $105,699

* Sebring Capital, out of business - $239,855

* Wells Fargo Bank, Salt Lake City, UT - $59,500

* Optimum Financial, Scottsdale, AZ - $69,361

How he'll pay

McMahan will not have to pay interest on the restitution, the judgment documents state, however, payment is to begin immediately.

According to the federal judgement, while McMahan is incarcerated, if he earns wages in a federal prison industry job, a minimum of 50 percent of his wages goes toward his financial obligation.

However, if he does not work in a prison job, McMahan "must pay a minimum of $25.00 per quarter towards the financial obligations imposed in this Order."

"These payments made while incarcerated do not preclude the government from using other assets or income of the defendant to satisfy the restitution obligation," the judgement states.

After he is released from prison, the judgement states that McMahan "shall pay restitution at the minimum rate of 10 percent of monthly gross income, until such time as the Court may alter that payment schedule in the interests of justice."

Also, the government may enforce the full amount of restitution ordered "at any time."

Snow is scheduled to be sentenced on Dec. 7, while Ritch faces a sentencing hearing on Jan. 4. Henderson is to be sentenced on Dec. 21 and Aydelott will appear in federal court on Jan. 21 to learn his punishment.