By Sopan Deb
Rock Center

An emotional Charlie Engle emerged from Dismas Charities, a halfway house in Greensboro, N.C., and greeted his two teenage sons, telling them he could not have done it without them.

He was referring to the prison term he just finished serving (most of it at a federal prison in Beckley, W. Va.) for mortgage fraud.

“The second I walked out that door and I was no longer in prison,” Engle told Rock Center’s Harry Smith.  “It's almost impossible to explain the feeling, but it is just that sense that OK, now I can be here for my boys again.”  Engle's interview airs Thursday, Nov. 15 at 10 p.m./ 9 p.m. Central on NBC.

Engle spent a year and half in prison for his role in the financial crisis.  But he didn’t work on Wall Street and he was not a banker.  He was convicted of exaggerating his income on his mortgage applications – a common practice during the housing boom.  

While many big banks were chastised for risky behavior in lending by Congress, they got bailouts worth billions.  Charlie Engle, meanwhile, was the target of a federal case involving an undercover operative, a dogged IRS agent and conspiring mortgage lenders.

Engle’s troubles started because of his passion for long distance running in extreme environments.   

“The run across the Sahara ended up being a little over 4,600 miles,” Engle said. “We basically ran about 50 miles per day, every single day, for 111 consecutive days without taking a single day off.”

Engle’s run, with two friends, would be an adventure to raise money for clean water projects in North Africa. Accompanied by a film crew, the journey was turned into a documentary narrated by actor Matt Damon that premiered at the 2008 Toronto Film Festival.

Engle got some notice, including an appearance on “The Tonight Show” with Jay Leno. That was enough to get the attention of Robert Nordlander, an IRS agent who wondered how Engle could find the time to train for running while still maintaining an income.

“Being the special agent that I am, I was wondering, how does a guy train for this because most people have to work from nine to five and it’s very difficult to train for this part-time,” Nordlander told a grand jury in May, 2010.

Nordlander spent almost 700 hours investigating Engle, combing through his banking and tax records. He even put Engle under surveillance and went through his trash looking for evidence.

He was not satisfied and sent in an attractive undercover agent who was also a runner.

WATCH VIDEO: Runner, not Wall Street, prosecuted for mortgage fraud

The agent came to Engle’s front door and said she was looking at apartments in his complex.  She suggested they have lunch the next day,   where, as Engle remembered, “most of her questions, looking back now, were almost like of a financial nature.”

At a local restaurant in Greensboro called Mimi’s, Engle revealed he had taken out mortgages on a couple of investment properties. He went on to say something that would come back to haunt him.

“…I had a couple of good liar loans out there, you know with my, my mortgage broker who didn’t mind writing down, you know that I was making 400 grand a year when he knew I wasn’t,” said Engle. 

“What’s funny is after I made that statement, it’s like all of a sudden, the lunch ended very quickly,” Engle told Smith.

He did not realize that the agent was wearing a wire and that he had just made a statement that would land him in court.

“Liar loans” are the colloquial term for something called “stated-income loans,” which were common during the housing boom and a contributing cause of the housing crisis. These loans did not require lenders to verify a borrower’s assets or incomes.

They were initially conceived decades ago for extremely wealthy borrowers who would normally have complicated tax returns. But during the housing boom, lenders began abusing the practice. Engle was one of millions of borrowers who took out such loans, which were being handed out freely by many lenders eager to get in on the boom.

Engle contended he did not fill in the income figure on his loans, but he admitted he signed the closing documents. He also insisted that the conversation with the undercover agent was taken out of context.

 “I did have liar loans, but I’m not the one who told the lies,” Engle said. “The brokers, the banks, the people who --  as a borrower we all know we're not in charge of the process.”

The IRS did not find tax fraud, but Engle was indicted for mortgage fraud.

He was convicted in large part because of the testimony of the mortgage broker for one of his loans, who along with Engle’s loan officer and the seller of the property, all pleaded guilty to conspiring to defraud several banks of millions of dollars.

The mortgage broker, John Hellman, got 10 months in prison while Engle received a 21-month sentence. Neil H. MacBride, the U.S. Attorney for the Eastern District of Virginia, declined Rock Center’s request for an interview, but sent a statement saying, “Mr. Engle was convicted by a jury of fraudulently obtaining more than a million dollars in four mortgage loans…”     MacBride also noted his office also prosecuted fraudsters in a case worth $2.9 billion.

The big banks that handed out those liar loans by and large escaped criminal prosecution, said Neil Barofsky, who was the inspector general for TARP, the government’s program to bailout the banks.  Barofsky told Rock Center that while it is easier to prosecute the smaller fish involved in the financial crisis, that does not justify ignoring the bigger ones.

“And it doesn't really accomplish the broader goals that you want from your Department of Justice in the aftermath of a crisis, and that's to make it very clear, that if you break the law, if you do this type of unethical behavior, that you'll be held accountable,” Barofsky said. “And all the Charlie Engle’s in the world rotting in jail aren't going to accomplish that goal.”

Editor's Note: Harry's Smith's full report about Charlie Engle airs Thursday at 10pm/9c on NBC's Rock Center with Brian Williams.