A mortgage broker has admitted guilt in a mortgage fraud scheme led by a former South Bend police officer.
At a hearing set for Tuesday, Steven D. Kronewitter, 49, will plead guilty in U.S. District Court to bank fraud, according to recently filed court documents.
Kronewitter has admitted that in 2005, doing business as Allied Banc Mortgage, he brokered mortgage loans for former South Bend police officer Robert Culp that he knew were fraudulent.
For example, in preparing a $58,650 loan application for a Linden Avenue property that Culp sold, after Culp had bought it for $19,500, Kronewitter falsely told the mortgage lender, Wells Fargo Bank, that the buyer had $27,000 in the bank, according to court records.
The buyer did not have that money, and Wells Fargo ultimately foreclosed on the loan.
Kronewitter has admitted causing Wells Fargo from $200,000 to $400,000 in losses on such loans on 17 South Bend properties.
Culp, 45, an officer for 17 years, in 2008 pleaded guilty to bank fraud and resigned from the department. In March 2009 he began serving a 4 1/2-year prison sentence.
Prosecutors have said the mortgage fraud scheme, which ran from 2003 to 2007, involved the purchase of 194 inexpensive houses in the South Bend area, many of which needed substantial repairs.
The houses were then resold for substantially more than their values, sometimes at prices that were two to three times the houses' actual worth, according to court documents.
Linda C. Riffle, a 58-year-old landlord, and William DePalma, 30, who owned a home remodeling business, pleaded guilty to receiving kickbacks from Culp in exchange for recruiting straw buyers in the scheme. Riffle received a 27-month prison term and was set to be released Thursday.
DePalma finished serving an 18-month sentence in March.
Culp is set for release in March 2013.
Staff writer Jeff Parrott: email@example.com 574-235-6320