An Old Westbury man has been charged with running a $7.5 million mortgage scam, prosecutors said Tuesday.

Mitchell Cohen, 54, was arrested Tuesday along with Erin Davis, 43, of Yonkers, according to Preet Bharara, U.S. Attorney in Manhattan. They each were charged with conspiracy to commit wire, bank, and mail fraud, and two counts of conspiracy to make false statements. The charges carry penalties of up to 40 years in prison. Cohen also faces up to 5 years in prison on perjury charges.

Prosecutors described the alleged scam in a news release: “From 2007 until October 2010, Cohen ran a real estate brokerage in Queens known as Buy-a-Home Llc or First Home Brokerage, where he hired Davis as a sales manager.

The pair recruited 'unsophisticated buyers of modest means,' and persuaded them to buy homes at prices that were inflated by $100,000 above the original sales price. The duo improperly funneled money to the buyers to make it appear that they could qualify for loans insured by the Federal Housing Administration.

FHA loans require low down payments, but they set standards for borrowers’ finances that Buy-a-Home’s borrowers could not actually meet, prosecutors said. The scam allowed Cohen and his company to earn 'substantial profits,' and Davis to collect sales commissions,” prosecutors said.

Cohen and Davis allegedly defrauded the federal Department of Housing and Urban Development into issuing $7.5 million in loans that were then purchased by banks. In addition, many homes went into foreclosure, forcing FHA to make nearly $1 million in insurance payments, prosecutors said.  

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