A Virginia mortgage broker who admitted he sold the same mortgages to two different buyers faces up to 10 years in prison after pleading guilty to federal fraud charges.
Federal prosecutors in Alexandria say a Florida savings and loan association lost more than $1 million as a result of the scheme involving the now-defunct Commonwealth Mortgage Corp. of Virginia.
Homeowners whose mortgages were involved in the case were not affected adversely, authorities said.
Edward R. Fellows Jr., the former president of Commonwealth Mortgage, pleaded guilty Tuesday in U.S. District Court in Alexandria to one count of causing someone to travel in interstate commerce with intent to defraud and a second count of interstate transportation of stolen and forged securities.
U.S. District Judge Albert V. Bryan Jr. set sentencing for Jan. 14 on the charges, which carry maximum penalties of 10 years in prison and a $10,000 fine on each count.
Fellows acknowledged that he sold to other investors 39 mortgage notes that he already had sold to Southern Federal Savings and Loan Association of Pompano Beach, according to court documents.
Fellows sold some $7 million worth of mortgages to Southern Federal and was supposed to manage the mortgages, collecting monthly payments from homeowners on Southern Federal's behalf.
Assistant U.S. Attorney Leonie Brinkema said Southern Federal executives became concerned about the notes in mid-1978 and ordered Fellows to send all the original files to Florida. Several of the mortgage notes were discovered to be unsigned or missing, Brinkema said.
Three Southern Federal executives confronted Fellows twice in 1978 at his Northern Virginia office, according to Brinkema. She said Fellows finally accounted for more than 75 of the notes, but the FBI later determined that Fellows allegedly had sold 39 of the mortgages twice.
The investigation also found that 11 mortgage loans Fellows said he had made had not been made and that proceeds of four other mortgages paid off by homeowners had not been forwarded to Southern Federal as required, according to a statement of facts filed in the case.
Commonwealth Mortgage was liquidated in bankruptcy and its remaining assets were acquired by Southern Federal in 1979, Brinkema said yesterday