Opinion ID: 794551
Heading Depth: 2
Heading Rank: 1

Heading: HUD-Insured 203(k) Mortgage Loans

Text: 4 From November 1997 through December 1999, Francis Boccagna and various confederates participated in an elaborate scheme fraudulently to obtain millions of dollars through private real estate mortgage loans insured by HUD under its 203(k) loan program. See 24 C.F.R. §§ 203.50, 203.440 et seq. The 203(k) program is HUD's primary vehicle for stimulating the private rehabilitation and development of residential properties, consistent with HUD's stated mission to increase home ownership, support community development and increase access to affordable housing free from discrimination. See Appellee Br. 6-7. 5 To procure a 203(k) loan, a prospective buyer must submit both a mortgage application to an approved private lender and a 203(k) application to HUD. The private lender grants the mortgage contingent on HUD approving the 203(k) application and agreeing to guarantee the loan. Once HUD's approval is secured, the private lender disburses money to the buyer in two steps. At step one, the buyer directly receives the amount of money necessary to purchase the residence at issue. At step two, another sum of money is placed into an escrow account, from which the buyer is authorized to make withdrawals to pay for the accrued costs of rehabilitation work. The regulations effectively limit the number of properties an individual such as Boccagna can acquire and rehabilitate through the 203(k) loan program. No such limitation, however, applies to not-for-profit organizations, which can be awarded multiple 203(k) loans to acquire and rehabilitate numerous low-to-moderate income properties.