James Lytle and Martin Valadez met in a Wisconsin jail in 2001. Three years later, says the Milwaukee Journal Sentinel, they were business partners – tapping the mushrooming subprime mortgage market for $4?million in fraudulent loans. Lytle pleaded guilty in 2007 and is serving a seven-year sentence for masterminding one of the largest mortgage fraud schemes in Wisconsin history. A top state banking regulator says he probably never should have received a broker’s license. Valadez, who also pleaded guilty to mortgage fraud charges in 2007, was sentenced to six years in prison. He kept his broker’s license until it expired, about six weeks after he agreed to plead guilty.
A Journal Sentinel investigation published Sunday showed that more than 340 admitted criminals, including burglars, drug dealers, thieves, and a killer, had loan broker’s licenses last year. Though new, stricter standards are expected to be implemented this year, experts say much of the damage has already been done. Federal, state and local authorities have ongoing investigations of mortgage fraud that occurred in the early and middle part of the decade.