Chesapeake woman guilty of mortgage fraud

NORFOLK

A Chesapeake woman pleaded guilty Tuesday to conspiracy to commit mail and wire fraud, admitting her role in a mortgage rescue scheme that cost lenders and homeowners between $400,000 and $1 million.

Kathy P. Harps, 51, faces up to 20 years in prison when she is sentenced Nov. 30 in U.S. District Court.

Harps admitted that, during the height of the mortgage bubble in 2006, she promised to bail out homeowners struggling with their mortgages and make them money at the same time.

Harps and her companies New Beginnings Group and IMAK Group siphoned off proceeds from mortgage refinance loans and caused the default of at least four mortgages, according to court filings.

Standing before U.S. Magistrate Judge Tommy E. Miller on Tuesday, Harps had difficulty at times, stopping to compose herself.

In one case, a Chesapeake couple struggling to make mortgage payments went to Harps for help. James and Zelma Price, retired and living on a fixed income, entrusted their home to Harps after falling behind on their monthly payments.

The Prices agreed to sell their house on Shadow Brooke Drive to Harps with the understanding that they could live in it for a year while paying rent to Harps.

In return, Harps would pay the couple $30,000 to $40,000, make their mortgage payments for a year, help them repair their credit and return the title to them when the year was up.

The plan sounded too good to resist. The Prices had paid around $244,000 for the five-bedroom, 3,100-square-foot brick Colonial in 1996. Ten years later it was appraised at $544,000. Harps bought it for $540,000, putting down $27,000 and taking out a $513,000 loan.

But unknown to the Prices, Harps lied on the loan papers, claiming that she would be living in the home and that she had not declared bankruptcy in the previous seven years. Harps declared bankruptcy in 2000; since the sale of that home, she has declared bankruptcy two more times.

After the closing, Harps had the settlement agent revise the agreement to make her the beneficiary of $95,500 in proceeds from the loan instead of the Prices. When the Prices asked for their share, Harps stalled and ultimately never paid them. Harps made about $58,000 in mortgage payments on the loan, but when the payments stopped, the lender foreclosed and the Prices were forced to move out.

Court records indicate that Harps made similar transactions with three other customers, in Virginia Beach, Suffolk and Williamsburg.

The Prices successfully sued Harps' companies, winning a $195,000 judgment. They also won a $200,000 judgment against the lender, Everyday Lending, which went out of business.

The FBI and others involved in the case are trying to determine how much the lenders and the homeowners lost and what assets, if any, Harps has left. Assistant U.S. Attorney Robert Krask declined to comment after the proceeding.

Tim McGlone, (757) 446-2343, tim.mcglone@pilotonline.com