Supreme Court To Determine Appropriate Restitution For Mortgage Fraud

Posted On Tuesday, October 22, 2013

The U.S Supreme Court will hear an appeal brought by a straw buyer in a mortgage fraud scheme challenging a trial court’s interpretation of the scope of restitution under the Mandatory Victims Restitution Act. The issue involved is one which has divided the circuit courts.

In the case of Benjamin Robers v. United States, Case No. 12-9012, Robers, who pleaded guilty in 2010 to conspiracy to commit wire fraud in connection with the mortgage fraud scheme, is challenging the district court’s $218,952.00 restitution order arguing that the Court improperly interpreted the MVRA, holding him responsible for the decline in real estate values during the course of the scheme. The Seventh Circuit upheld the district court’s restitution order.

The mortgage fraud scheme to which Robers pled guilty, began in 2004 and involved more than fifteen houses in Walworth County, Wisconsin. Robers admitted that he signed mortgage documents for two properties seeking loans based on false and inflated income and assets, and based on his claim that he would live in the houses and pay the mortgages. Eventually, the loans went into default and the real estate was foreclosed upon and resold.

Robers was eventually sentenced to three years probation and ordered to pay $218,952.00 in restitution to the victims – a mortgage lender and a mortgage insurance company. Robers challenged the restitution order claiming that the court improperly calculated the “offset value” of the property that was returned. He argued further that the MVRA required the court to determine this value based on fair market value of the real estate on the date the victim lenders obtained title to the houses. Since that was the date when the property was returned.

On the other hand, the government argued that the foreclosure on the properties did not constitute return of the property. According to the government, the return occurs only when the collateral real estate is resold and the “offset value” must be determined based on the eventual cash proceeds received in the sale.

The U.S. appellate courts are divided on this issue. The Second, Fifth and Ninth Circuits have adopted Robers’ position in similar cases. The Third, Eighth and Tenth Circuits side with the government on the issue. It will be up to the U.S. Supreme Court to resolve this circuit split.