O.C. Builder Sentenced for Falsifying Loan Data : Courts: He was convicted of helping clients buy his homes by inflating their incomes in applications to lenders.

An Orange County builder convicted of helping clients buy more than $5 million worth of his homes by falsifying their loan applications has been sentenced to 44 months in federal prison.

Lloyd Myles Rucker of Newport Beach built custom homes on speculation and often sold them to buyers whose incomes were far below the minimum required, according to testimony in his U.S. District Court trial in Los Angeles. Lenders lost more than $600,000 as a result of the scheme, court records show.

Assistant U.S. Atty. Ellyn Lindsay said the case illustrates a common problem in banking. “This is the kind of thing that helped bring down the savings and loan industry,” she said.

Rucker, 36, was sentenced earlier this month on multiple counts of mail and bank fraud and making false statements to federally insured lenders. The builder, who was convicted in late August and has been in custody since Oct. 17, is appealing.

He was doing business as Lloyd Myles Development Co. from 1989 through 1992, when the frauds occurred. Rucker put his company into bankruptcy liquidation in October, 1993.

Kevin C. Hutchinson, 30, of Corona del Mar, identified as a client and sometime associate of Rucker, pleaded guilty Wednesday to one count of mail fraud in the case and faces up to 18 months in prison.

Hutchinson, a real estate agent who helped Rucker find buyers for his homes, fled after being indicted in March, apparently to avoid being forced to testify in Rucker’s trial. He surrendered to federal authorities after the trial ended in late September and has been in custody since then.

Rucker purchased so-called tear-down properties in Orange County coastal communities including Newport Beach, Huntington Beach, Costa Mesa and Corona del Mar. He demolished the existing homes and built new houses on the lots. But in “his rush to sell the properties” so he could pay off his construction loans, Lindsay said, Rucker knowingly recruited unqualified buyers and helped them falsify loan documents.

According to court records, he inflated their claimed monthly incomes, submitted falsified wage and bank statements, secretly loaned buyers money for their down payments, and at least twice created phony bank accounts for the borrowers.

Court records show that Rucker helped several buyers with incomes of less than $25,000 a year obtain loans for $350,000 or more--loans that typically required annual incomes of $85,000 or more.

Among the dozen falsified loan applications Rucker helped prepare was one for a $975,000 mortgage for his own Newport Beach residence.

Several of the borrowers have refinanced and are current on their payments, but at least five of the loans went into default, Lindsay said.

Rucker was also convicted of diverting $314,000 from two construction loans by falsifying documents in order to use funds earmarked for one project to pay bills for another.

Banking industry specialists and others say fraudulent mortgage and construction loan applications are an ongoing problem.

“There is a certain percentage of jerks that we all live with,” said Stephen W. Prough, president and chief executive of Downey Savings & Loan in Newport Beach. The thrift was not identified as a victim of the Rucker scams.

“It’s unfortunate that people [who falsify loan applications] don’t recognize that this is as serious as going down and pulling a gun on the clerk at the convenience store,” Prough said.