Opinion ID: 799781
Heading Depth: 2
Heading Rank: 3

Heading: Amount of Loss and Amount of Restitution Determinations

Text: Alexander next challenges the district court's assessment of the amount of loss and amount of restitution at sentencing. We review the district court's decision to award restitution for an abuse of discretion and the district court's finding as to the amount of loss for clear error. United States v. Frazier, 651 F.3d 899, 903 (8th Cir.2011). To the extent the district court interpreted the Mandatory Victims Restitution Act (MVRA) to determine its obligations in awarding restitution, we review those interpretations de novo. Id. As a general rule, the amount of loss is the greater of actual loss or intended loss. United States v. Parish, 565 F.3d 528, 534 (8th Cir.2009). Actual loss is the reasonably foreseeable pecuniary harm that resulted from the offense. United States Sentencing Commission, Guidelines Manual, § 2B1.1, comment. (n.3(A)(i)). Because the damage wrought by fraud is sometimes difficult to calculate, a district court is charged only with reasonably estimating the loss using a preponderance of evidence standard. United States v. McKanry, 628 F.3d 1010, 1019 (8th Cir.) (citation and internal marks omitted), cert. denied, ___ U.S. ___, 131 S.Ct. 1837, 179 L.Ed.2d 790 (2011). In mortgage fraud cases, we have previously approved loss amount determinations based on the difference between the unpaid principal balance of a mortgaged property and the subsequent sale price of the property. See McKanry, 628 F.3d at 1019; United States v. Mancini, 624 F.3d 879, 881-82 (8th Cir.2010). The district court determined by a preponderance of the evidence that the amount of loss was greater than $70,000 based on the evidence presented at the sentencing hearing of the difference between the unpaid principal on Alexander's loan ($130,590.99) and the foreclosure sale amount ($50,000.00). In challenging the amount of loss determination, Alexander claims that [u]nder a proper interpretation of the Guidelines, there was no loss as Bank of America, N.A., recovered the house through foreclosure and the undisputed evidence was that, at the time of recovery, the house was worth more than the loan. Referencing the 1099-A form filed by Bank of America, N.A. with the Internal Revenue Service, Alexander claims the property was worth $150,054.00. At the very least, Alexander asserts that the fair market value of the home was $143,460.00, the assessed value of the property in 2007. According to Alexander, the bank incurred no loss because the value of the house it repossessed (at least $143,460.00) exceeded the unpaid principal amount on the loan ($130,590.99). Alexander claims the district court erred in the amount of loss determination because HUD sold the house subsequent to Bank of America, N.A.'s full recovery. Alexander's arguments on this point are without merit. HUD was a victim on Count 1 by virtue of its guarantee of Bank of America, N.A.'s loan. See Mancini, 624 F.3d at 881-82 (holding that a mortgage insurer is a victim in a mortgage fraud case). Comment 3(E)(ii) of Sentencing Guidelines section 2B1.1 directs that [l]oss shall be reduced by the following:.... In a case involving collateral pledged or otherwise provided by the defendant, the amount the victim has recovered at the time of sentencing from disposition of the collateral, or if the collateral has not been disposed of by that time, the fair market value of the collateral at the time of sentencing. USSG § 2B1.1, comment. (n.3(E)(ii)). If the property had not been disposed of at the time of sentencing, then the district court could look to the fair market value of the collateral. Id. However, the property had already been sold at a foreclosure sale and so the amount of loss was offset by the amount the victim ha[d] recovered at the time of sentencing from disposition of the collateral. Id. Therefore, the court's calculation of over $70,000 in loss was proper under the Guidelines and was supported by a preponderance of the evidence. Alexander also argues the lower amount received as a result of the sale by HUD was unforeseeable. She claims HUD sold the house in a commercially unreasonable manner, HUD obtained an improper appraisal, and there were hidden defects and subsequent acts that damaged the value of the property. Alexander may be correct that the foreclosure sale may not have provided an optimal outcome; however, she has failed to cite any authority to support her contention that the foreclosure sale was commercially unreasonable. At the sentencing hearing, the evidence demonstrated that the property was listed with a realtor for approximately 10 days, advertised on the realtor's website and in a Multiple Listing Service (MLS) listing, and then sold at auction. Alexander has failed to point to any evidence or law that would show that the steps taken were not reasonable or that further actions were required. Furthermore, the testimony at sentencing indicated that the loss in value to the house was due in part to the house going from excellent and beautiful shape at the time Alexander purchased it to being a disaster at the time of foreclosure. Indeed, someone had taken the fixtures out of the bath or had tried to remodel or were in the process of remodeling, there was deferred maintenance, and there were holes in the walls. As the government points out, based on the changes to the home, the defendant knew, or should have known, that a substantial loss to the mortgage insurer would result when she defaulted on her loan and the property had to be sold as a foreclosed property. We next turn to Alexander's challenge of the district court's determination as to the amount of restitution. In reviewing whether the district court abused its discretion in such a ruling, we must first define the parameters governing the district court's obligation to order restitution. Frazier, 651 F.3d at 903. Pursuant to the MVRA, 18 U.S.C. § 3663 et seq., such an analysis includes first identifying the victims of the defendant's conduct and then determining the full amount of each victim's losses. Frazier, 651 F.3d at 903. While the amount of loss calculation looks to the greater of actual or intended loss, the amount of restitution under the MVRA cannot exceed the actual, provable loss realized by the victims. Id. at 905. The government bears the burden of proving the amount of restitution based on a preponderance of the evidence. Id. at 903. Here, the entity directly and proximately harmed as a result of the commission of Alexander's offense was HUD, which guaranteed Alexander's loan. The restitution amount included sums paid by HUD for the following costs: the unpaid principal ($130,590.99), interest owed on the loan ($8,862.16), the amount expended to obtain and acquire the property ($9,870.83), and other remaining costs associated with the sale of property ($13,789.70). By taking the sum total of these costs ($163,113.68), and subtracting the amount that HUD ultimately sold the house for ($50,000.00), the district court found the amount of restitution owed to HUD was $113,113.68. Alexander objects to the inclusion of interest and other foreclosure costs in the restitution determination, arguing that the MVRA provides no authority to include such costs. Yet the MVRA requires that the district court shall order ... that the defendant make restitution to the victim of the offense. 18 U.S.C. § 3663A(a)(1). We note that although interest costs are to be excluded for purposes of the loss amount, see USSG § 2B1.1, comment. (n.3(D)(i)), we have previously affirmed a district court's restitution amount that included interest and other foreclosure expenses. See United States v. Statman, 604 F.3d 529, 536-38 (8th Cir.2010). More importantly, the interest payment did not result in any windfall to HUD, as it was responsible for making such a payment to the lender based on its guarantee of the mortgage loan. Therefore, we decline to find that interest payments and other reasonably foreseeable expenses incurred by HUD were not compensable under the MVRA. Finally, Alexander claims that the restitution amount was excessive. Because the restitution amount was based entirely on the actual loss incurred by HUD, we reject this claim as without merit. See United States v. Moyer, 313 F.3d 1082, 1086-87 (8th Cir.2002) (affirming restitution amount where it represented the amount that the victim bank had lost on the fraudulent loan). Finding no error, we affirm the amount of loss and amount of restitution determinations.