A Fairfax County man who headed a multimillion-dollar real estate scam, victimizing banks and hundreds of Northern Virginia residents, was sentenced by a federal judge Friday to six months in the Alexandria city jail. Federal sentencing guidelines called for a prison term of seven to nine years.

Mark R. Dain, 33, is cooperating with federal authorities investigating his vast fraud, which ended five years ago, but his sentence was less than the prison terms received by three of his employees. Federal prosecutors declined to explain why they supported a reduction in Dain’s sentence. In addition to the jail time, Dain must serve six months in a halfway house with work release and pay restitution.

An estimated 500 Northern Virginia residents were recruited by Dain and his partner, Mark Jalajel, to buy “no money down” properties in North Carolina and South Carolina between 2006 and 2008. Their company, Total Realty Management (TRM) of Woodbridge, promised that buyers would make no payments for two years on interest-free mortgages and would be able to quickly flip their vacant lots for big profits. Jalajel has not been charged.

Some of those customers were in the Alexandria courtroom of U.S. District Judge T.S. Ellis III and were astounded by the six-month jail sentence for the leader of the conspiracy.

They noted that Ellis and the lawyers discussed only the banks as victims. But dozens of Fairfax school administrators and teachers, firefighters, Pentagon workers and many others with mortgages were lured in. They bought the land for $200,000 to $600,000 but were forced into financial hardship or bankruptcy when their properties became almost worthless after the financial crash.

“Mr. Dain was able to convince many people to get involved in this because of his gift of gab,” said Mike Mahoney, who lives in Herndon and purchased two lots in North Carolina from Dain. “Now he’s used that gift of gab to convince the judge.”

“That’s not even a slap on the wrist,” said Evan Allseitz, a Woodbridge resident who bought three lots from Dain and is still making monthly mortgage payments on one. “It’s ridiculous.”

It was 2006, and the value of real estate was skyrocketing. TRM was purchasing lots directly from a North Carolina developer, R.A. North, for about $150,000 and reselling them to Northern Virginia investors hours later. Many of the customers said they told Dain that, as schoolteachers or others with modest incomes, they couldn’t afford another mortgage.

But Dain and three of his employees have admitted they falsified numerous loan applications, increasing the income of the customers and even putting money in their bank accounts temporarily, to get approvals for the new mortgages. Evidence in civil lawsuits filed by the victims showed that loan officers for at least two banks were helping the scheme by seeking multiple appraisals for the vacant lots when initial appraisals didn’t justify the loans.

Since the financial crash, the lots are now assessed at about $20,000 each.

Dain pleaded guilty in July to conspiracy to defraud banks. The plea stemmed from 22 loans over six months in 2006 that cost four banks a total of $7.1 million, although court records show at least 500 properties were sold from 2006 to 2008 before the scheme collapsed. He was ordered Friday to pay $7.1 million in restitution at a rate of $250 per month.

In 2008, customers started suing Dain, TRM, R.A. North and the banks, leading to the FBI investigation. In April 2010, as colleagues began to be arrested and the civil cases heated up, Dain began cooperating with the investigation, according to a sentencing memo filed by his attorney. Records from the 2010 arrest of his chief financial officer, Michael McCracken, indicate that “the majority owner of TRM” wore a hidden recorder to implicate McCracken, who later received a 40-month sentence. Two other TRM employees received 24-month sentences.

Although the U.S. probation office calculated that Dain should receive a sentence of 87 to 108 months, Assistant U.S. Attorney Mark Lytle filed a memo recommending that Dain receive an 18-month term. Shortly after the hearing began, the lawyers and Ellis held a 30-minute bench conference to discuss a sealed memo Lytle had filed explaining the reason for the government’s 18-month recommendation.

Then Dain spoke publicly for the first time. “I have no excuse,” he said. “My life in my mid-20s was a series of immoral and terrible decisions. I take absolute accountability for that.”

Ellis did not discuss why he went from a sentencing guideline of seven to nine years in prison to a term of six months in jail and six months in a halfway house.

Lytle, defense attorney Michael T. Pritchard and U.S. attorney’s office spokesman Zachary Terwilliger declined to discuss the reason for the Dain’s sentence. Pritchard said that he thought it was reasonable and that he had asked Ellis for a three-month sentence.