Letters of credit (L/Cs) featured in a mortgage scam in the US in which at least three bank employees participated.

The bankers, who were employed by Bank of America or Wachovia, are amongst seven others who could face jail terms of up to 30 years.

Inflated prices

The perpetrators of the mortgage frauds agreed to buy homes at one price from builders. They then arranged buyers at a higher price and then lied to get mortgages at the higher level, according to court documents.

Prices were generally inflated by US$200,000 to US$500,000. The alleged fraudsters would subsequently share the difference between the two prices.

False L/Cs

In some cases, the fraudsters and unidentified others are accused of paying bribes of between US$4,000 and US$55,000 to the three bank employees and others for false L/Cs.

The L/Cs were used to assure lenders that the borrowers would repay their mortgages.

Prison term

Ten people are currently facing charges of at least one count of bank fraud or bank bribery. Each of these charges carries a maximum prison sentence of 30 years.

The frauds were mainly perpetrated in 2006 and 2007.

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