Roselle Mayor Donald Shaw and his wife paid $649,000 for their home in Elizabeth but they borrowed $627,288 from Family First Funding, a state-licensed mortgage bank headquartered in Toms River, New Jersey.
Among the things that Shaw promised when he borrowed that money was that he would use the premises at 728-732 Thomas Street in Elizabeth as his principal residence, which means he would live there within 60 days of closing on the home.
If he is not living in the Thomas Street residence, then he would appear to be in violation of the mortgage agreement and guilty of a scheme to defraud a financial institution of hundreds of thousands of dollars.
In the alternative, Shaw continues to collect a paycheck for being mayor but he would be violating a municipal ordinance if he is residing outside the borough and if he votes in the upcoming primary election from the address where he is registered to vote instead of his Elizabeth home, the Mayor could be hit with charges of ballot fraud.
Shaw is in a bind of his own making, but he is not the only politician to get himself into a fix like this.
Donald Trump’s last White House chief of staff, Mark Meadows, was removed from the voter roll in North Carolina amid a criminal inquiry into whether he committed election fraud by registering to vote at a residence he never owned or lived in.
Ballot fraud and cheating taxpayers by collecting a salary while in violation of a residency ordinance are serious offenses, but penalties are not as severe as they can be for mortgage fraud.
The FBI categorizes illegal actions taken by a borrower motivated to acquire a house or mortgage as a financial institution fraud (FIF), the class of criminal schemes targeting traditional banks and other federally-insured financial institutions.
“It is crime characterized by some type of material misstatement, misrepresentation, or omission in relation to a mortgage loan which is then relied upon by a lender. A lie that influences a bank’s decision—about whether, for example, to approve a loan, accept a reduced payoff amount, or agree to certain repayment terms—is mortgage fraud,” said the FBI, which is charged with investigating such crimes.
Shaw also promised that he would insure the premises at 728-732 Thomas Street in Elizabeth, which probably entailed either a confession to his living outside Roselle or a material misrepresentation to influence the insurance company that issued coverage.
After selling the house they lived in while still residents of the borough for just $312,500, in December 2020, only a few weeks after Shaw was sworn into the mayor’s office following his crushing defeat of Councilwoman Denise Wilkerson, it was unclear where the borough’s chief executive was hanging his hat.
There are strong indications that the federal government does not take such crimes lightly.
On March 10, 2022, U.S. District Judge Susan D. Wigenton sentenced Maurice Bethea, 54, of Newark, to nine years in prison for conspiring to obtain mortgage loans under false pretenses, according to Vikas Khanna, the First Assistant United States Attorney for the District of New Jersey.
“Mortgage fraud is a crime that consists of some type of intentional material misstatement, misrepresentation, or omission regarding a mortgage loan that is relied upon by a lender to make a decision,” said Jonathan F. Marshall, a criminal defense attorney. “The two distinct types of mortgage fraud are fraud for profit and fraud to obtain housing. If you are facing a criminal charge of mortgage fraud or loan fraud, you are looking at serious penalties if convicted.”
Occupancy fraud occurs when a borrower wishes to obtain a mortgage in order to purchase an investment property while claiming that they will live on the property.
This is considered to be a type of fraud because lenders generally charge higher interest rates for investment property mortgages, as they are considered to be a more risky type of loan for lenders.
If Mayor Shaw told the truth when he denied living out of town at a recent Borough Council meeting, then he must have lied when he signed a document stating the house on Thomas Street in Elizabeth is his primary residence.
If he told the truth when he signed a sworn statement on his mortgage papers, then he lied when he declared that he is still living in Roselle.
Shaw obviously painted himself into a corner. Who is he going to blame?