3 indicted in $750,000 mortgage fraud scheme

A federal undercover investigation dubbed Operation Madhouse has resulted in the indictment of three for allegedly scheming to get $750,000 in mortgage loans.

Paul Demos, Michael Fort and Jeffrey Olson were not arrested. The Chicago-area real estate investor, the president of a Colorado real estate financing company, and the licensed appraiser are each charged with several counts of bank fraud.

Each count of bank fraud carries a maximum penalty of 30 years in prison, a $1 million fine and mandatory restitution.

The scheme took place between June and September 2010 and involved three Chicago houses.

According to the indictment, the men planned to profit from reselling property at an inflated value. They submitted fraudulent loan applications for $750,000, inflated the value of the properties and hid information from lenders.