The former owners of Virginia Beach-based Landbank Equity Corp. were convicted of masterminding a conspiracy to charge exorbitant fees to homeowners for second mortgage loans and sell those loans to financial institutions knowing that many would never be repaid.

William R. Runnells Jr. and his wife, Marika Lody Runnells, captured in Dallas in March after having eluded federal authorities for two years, were found guilty Friday in U.S. District Court in Norfolk on 87 and 59 federal charges, respectively, including racketeering, tax fraud and obstruction of justice.

U.S. Attorney Henry E. Hudson, noting that the Landbank investigation "involved the most significant loss to private citizens and institutions" of any case his office has ever prosecuted, said yesterday that the scheme caused more than $50 million in losses to federally insured financial institutions.

Federal authorities also claim that nine savings and loan associations suffered a financial collapse in part because of their purchase of fraudulent Landbank portfolios.

The Runnellses face possible prison terms of more than 250 years and fines exceeding $1 million each. U.S. District Judge J. Calvitt Clarke Jr. set sentencing for Jan. 28.

The 11-week trial brought to a close an intense three-year investigation and prosecution of Landbank executives.

Formed in 1980, Landbank sold more than 10,000 mortgages to about 40 institutions and operated more than 30 offices in five states before it filed for bankruptcy protection in 1985.

Assistant U.S. Attorney James A. Metcalfe, a lead prosecutor in the case, said the scheme relied on homeowners who came to Landbank desperate for money.

"It could be a person who just lost their job and couldn't make their payments on their first mortgage, it could be someone who just had an operation and couldn't pay for it," said Metcalfe.

The prosecutor said Landbank took advantage of borrowers by charging excessive fees, noting that the lender charged an average of 29 percent of the value of the loan in origination and processing fees.

Metcalfe said testimony also proved that Landbank then packaged and sold the loans to institutions, hiding the fact that 30 percent to 50 percent of the borrowers had failed to make payments.

Landbank representatives also falsified appraisals of the properties covered by the loans.

"Documents show that Bill Runnells gave directions to appraisers to jack up the appraised value of properties" to increase the resale value of the loans, Metcalfe said.

Nine individuals have been prosecuted in the Landbank case, including William Runnells's mother, Lucille P. Runnells; Landbank's former lawyer, Frank E. Butler III; and accountant Owen R. Thornton.

Ross E. Schumann Jr., a former Landbank vice president, committed suicide during a recess in his 1988 trial in Norfolk.

William Runnells, 49, failed to appear at a 1988 arraignment after he was first indicted.

He and Marika Runnells, 48, were arrested March 29 in an affluent neighborhood in Dallas where they lived and operated diet and stop-smoking clinics.

In a similar case, Eve A. Freedlander, a mortgage banker in Richmond, was sentenced in federal court in Richmond yesterday to 10 years in prison for bank and wire fraud.

Freedlander admitted in July that she played a key role in defrauding the Federal National Mortgage Association and other investors of more than $200 million through the sale of questionable second mortgages by her Freedlander Inc. The Mortgage Company.

Freedlander, 64, was also ordered to pay $135,600 in restitution to private investors.