OKLAHOMA CITY — The septuagenarian founder of a mortgage lending and loan servicing company was sentenced to eight and two-thirds years in prison for “a broad range of fraudulent conduct,” Acting U.S. Attorney Robert J. Troester announced.
Ronald J. McCord, 71, of Oklahoma City, also was ordered to pay $51,861,806 in restitution to the victims of his illegal schemes. McCord defrauded two state banks, Fannie Mae, homeowners and others, court records show.
“This was a carefully calculated scheme” by which McCord “defrauded local banks out of tens of millions of dollars, made false statements to a financial institution, diverted escrow monies intended to pay homeowners’ taxes and insurance premiums to cover his company’s operating expenses, and then laundered the proceeds to fund his lavish lifestyle,” Troester said.
A federal grand jury here returned a 24-count indictment against McCord, the chairman and founder of First Mortgage Co. (“FMC”) based in Oklahoma City. The charges included bank fraud, money laundering, and making a false statement to a financial institution.
McCord pleaded guilty to five counts of that indictment. He admitted defrauding state-chartered financial institutions Spirit Bank (“Spirit”) and Citizens State Bank (“Citizens”), as well as their respective residential mortgage subsidiaries, American Southwest Mortgage Corporation (“Mortgage Corp.”) and American Southwest Mortgage Funding Corporation (“Funding Corp.”).
Citizens and Spirit are “sister banks” due to their overlapping ownership, the indictment relates.
An independent audit performed by the Oklahoma State Banking Department discovered that McCord sold more than $14.1 million in Spirit/Mortgage Corp. and Citizens/Funding Corp. loans “out of trust” by failing to repay Spirit/Mortgage Corp. when certain loans initiated by Spirit/Mortgage Corp. were refinanced or otherwise paid off. At the time of the discovery, FMC carried outstanding balances of about $200 million and $140 million on the Spirit/Mortgage Corp. and Citizens/Funding Corp. lines of credit, respectively.
Spirit and Citizens both offered “residential warehouse lending,” described as a line of credit via which they lent money to First Mortgage Co. and other lenders to finance residential mortgages.
Upon learning of McCord’s conduct, Spirit/Mortgage Corp. and Citizens/Funding Corp. terminated future warehouse lending to FMC. They also instituted new notification requirements that required McCord to assign FMC-funded mortgages to Spirit/Mortgage Corp. and Citizens/Funding Corp. to ensure the title companies handling those mortgages sent payoffs directly to the banks.
In court, McCord admitted he filed the assignments as required, but then caused the mortgages to be released on two properties – in Leland and Denver, N.C. – after collecting the mortgage payoffs.
Spirit/Mortgage Corp. and Citizens/Funding Corp.’s refusal to fund new FMC mortgages prompted McCord to seek out a new warehouse lender.
Consequently, in early 2017 McCord began negotiating with CapLOC, a North Carolina-based mortgage lending business, and offered to sell FMC’s mortgage lending business in exchange for quick funding from CapLOC. McCord admitted that he made a materially false statement and representation to CapLOC in the course of those negotiations in order to influence CapLOC’s actions.
Also in 2017, FMC serviced approximately 12,000 loans worth approximately $1.8 billion for the Federal National Mortgage Association (“Fannie Mae”).
At his plea hearing, McCord admitted he defrauded Fannie Mae by diverting escrow monies intended to pay homeowners’ taxes and insurance premiums to cover FMC’s operating expenses. He also admitted that he then laundered the proceeds by causing a wire transfer from FMC’s operating account to a custom home builder as payment toward construction of McCord’s vacation home in Colorado.
At the sentencing hearing, U.S. District Judge Robin J. Cauthron found that McCord caused a total loss of more than $95 million to local banks, other financial institutions, and borrower homeowners. Cauthron heard statements from representatives of three of those victims, as well as arguments from both parties, before rendering a 104-month prison sentence and requiring $51.8 million in restitution.
McCord was ordered to surrender to the Federal Bureau of Prisons on Jan. 6 to start his prison term. Cauthron also ordered McCord to serve three years of supervised release after completing his term of incarceration.
The case was investigated by the Federal Housing Finance Agency – Office of the Inspector General, the FDIC – Office of Inspector General, and the FBI’s Oklahoma City Field Office. Assistant U.S. Attorney Julia E. Barry prosecuted the case.