Attorney General Martha Coakley's Office Announces Guilty Plea of Former Somerville Lawyer in Connection with Stealing Over $2 Million From Mortgage Lenders in Mortgage Stacking Scheme
While practicing as a real estate lawyer in Somerville and Medford, Carey engaged in a scheme called "mortgage stacking" on four residential properties he or his family members owned. The scheme involved serially refinancing the loans on these properties, without paying off the existing loans. Carey was also the agent for a New England title insurance company which allowed him to issue title insurance policies on mortgage transactions he processed. Title insurance policies protect lenders in the event that there are defects in the title of the property.
On various occasions between April 2002 through September 2004, Carey performed the functions of closing attorney on mortgage loans on each of the properties involved. Carey "stacked" three mortgages on a home in Medford, two mortgages each on two different properties in Everett, and one mortgage on his personal residence in Medford. Carey also falsified information on mortgage loan applications by omitting certain mortgages on the various properties, and also signed a family member's name on false mortgage applications and closing documents he created. When he received the proceeds of the loans, Carey did not pay off the existing mortgages on these properties, but rather used the funds for his own benefit. Carey issued title insurance policies or commitments in connection with the transactions, and the lenders were therefore protected, but ultimately the title insurance company suffered the financial loss. As a result of this scheme Carey stole over $2 million.
The lenders remained unaware of the problem because Carey continued to make monthly payments on all of the loans. In November 2005, a database search by Fannie Mae flagged the multiple mortgages on one of the properties, triggering a notification to one of the lenders. The lender then notified the title insurance company of the problem. Lawyers for the title insurance company then referred the matter to the Attorney General's Office in March 2006.
A Middlesex Grand Jury returned indictments against Carey on August 21, 2008. On September 12, 2008, Carey was arraigned in Middlesex Superior Court at which time he entered a plea of not guilty and was released on personal recognizance. Carey entered a change of plea to guilty in Middlesex Superior Court yesterday. Superior Court Judge D. Lloyd MacDonald presided over the plea.
This case was prosecuted by Assistant Attorney General Margaret Parks of Attorney General Martha Coakley's Corruption and Fraud Division, and was investigated by State Police assigned to the Attorney General's Office and Investigator Carl Mullen of Attorney General Martha Coakley's Financial Investigations Division. Postal Inspector Daniel Bonda of the United States Postal Inspection Service also assisted in the case.