A former loan officer at a Summerville mortgage company pleaded guilty Thursday to defrauding banks out of nearly $5 million in an elaborate and illegal real estate scheme.
Steven F. Weiss, who now lives in Tucson, Ariz., appeared in federal court in Charleston on Thursday to waive his right to an indictment by a grand jury. He then pleaded guilty to one count of conspiracy to commit wire fraud, mail fraud and bank fraud.
Weiss, 66, faces up to five years in prison, a $250,000 fine and an undetermined amount of restitution.
U.S. District Judge Sol Blatt will sentence him later.
Weiss was released on a $25,000 unsecured bond, partly because he has cooperated in the investigation and has no prior criminal record, assistant U.S. Attorney Dean Secor said.
Weiss is the second loan officer from the now-defunct North American Mortgage Group to plead guilty to the fraud, which took place from April 2006 to November 2007 and involved dozens of real estate deals that turned out to be shams.
The ringleader was Scott M. Wickersham, who has been cooperating with investigators under his 2013 guilty plea. He is awaiting sentencing, Secor said.
Authorities tied Wickersham and unidentified “others” to the widespread fraud involving nearly 90 purchases of single-family homes, condominium units and lots, mostly in coastal South Carolina and Georgia. Nineteen of the sales were in the Charleston region.
Secor said Weiss was working in the Myrtle Beach real estate business when he met Wickersham. Weiss then went to work at North American Mortgage, which was based at 1940 Trolley Road. The two developed a “tacit understanding” with each other and “other persons known and unknown” to enrich themselves by defrauding banks, according to court documents.
Weiss and Wickersham submitted falsified paperwork through the mortgage company to borrow a total of $45 million from federally insured lenders across the country. The scheme fed on the loose mortgage standards of the pre-recession era. Lenders also were taken in by inflated real estate appraisals and other bogus information.
“Sometimes empty lots were portrayed as homes,” Secor told Blatt.
In many cases, friends and relatives were paid to pose as “straw” buyers in the deals.
The scheme exploited the difference between the size of the loans, which were based on fake appraisals, and the lower prices that the purchasers actually paid.
Once the deals closed, the leftover proceeds either were split up or reinvested to keep the scam going. Some of the money was paid as commissions and bonuses to, among others, Weiss and Wickersham.
In some cases, they used their profits to pay the monthly bills for their straw buyers as they sought to flip the properties at a higher price, prosecutors said.
The money began to run dry in mid-2007, as the real estate business began to falter.
“Without those funds, and in the slumping housing market, they could no longer fund all of the mortgages ... and they could not sell the properties for the amount of the mortgage payoffs of the properties,” prosecutors said in a court filing.
The straw buyers were told “they were on their own,” Secor said.
The lenders eventually repossessed the properties, which turned out to be worth far less than the loan balances. The losses totaled about $20 million.
Secor said while Weiss “didn’t hatch the scheme,” he was a willing participant who profited from it. Prosecutors determined he was directly involved in at least 13 of the fraudulent transactions valued at $9 million. The losses on those mortgages totaled more than $4.96 million.
After being placed under oath, Weiss answered Blatt’s questions with brief, courteous responses during his hour-long plea hearing. Asked by the judge if Secor’s version of events was “substantially true and correct,” Weiss replied, “Yes, it is, your honor.”
Contact John McDermott at 937-5572.