Housing and Mortgage Fraud

August 10, 2016

Lincoln Military Housing, which owns and operates dozens of on-base and off-base military housing communities throughout Southern California, agreed to pay $200,000 to resolve allegations that it unlawfully evicted active-duty servicemembers and their families by obtaining default judgments against them in violation of the Servicemembers Civil Relief Act (SCRA).  According to the government, Lincoln Military requested default judgments against servicemembers without filing the affidavits required by the SCRA to alert the court of the tenants’ military status.  This put servicemembers at risk of being evicted without having an opportunity to participate in the case and without having an attorney assigned to represent them.  DOJ

August 8, 2016

Sherman Hills Realty LLC and Park Management LLC agreed to pay $125,000 to resolve allegations of violating the False Claims Act by failing to provide qualifying tenants with utility reimbursement funds provided to Sherman by the Department of Housing and Urban Development to be disbursed to low and no income tenants at the Sherman Hills Apartments in Wilkes-Barre, Pennsylvania.  DOJ (MDPA)

June 29, 2016

The CFPB and DOJ took joint action against BancorpSouth Bank for discriminatory mortgage lending practices that harmed African Americans and other minorities.  The complaint alleges BancorpSouth engaged in numerous discriminatory practices, including illegally redlining in Memphis; denying certain African Americans mortgage loans more often than similarly situated non-Hispanic white applicants; charging African-American customers for certain mortgage loans more than non-Hispanic white borrowers with similar loan qualifications; and implementing an explicitly discriminatory loan denial policy. The proposed consent order seeks $4 million in direct loan subsidies in minority neighborhoods in Memphis, at least $800,000 for community programs, advertising, outreach, and credit repair, $2.78 million to African-American consumers who were unlawfully denied or overcharged for loans, and a $3 million penalty.  CFPB

June 6, 2016

New York announced a settlement with 165 West 91st Street Holdings, LLC, a Manhattan developer, for the loss of two rent-controlled apartments in an Upper West Side building while it was being converted into a condominium, as a result of prohibited agreements to buy-out tenancy rights. The settlement requires the developer to pay a $540,000 penalty, $490,000 of which will go to the New York City Affordable Housing Fund created by the Attorney General’s office in order to compensate for lost affordable housing. The Martin Act, New York’s blue sky law, protects apartment purchasers and tenants in buildings that are converted to coops or condominiums. Tenants get an exclusive right to buy their units and, in most cases, cannot be evicted purely because the building is being converted. NY

May 26, 2016

The CFPB filed a lawsuit against former Wells Fargo employee David Eghbali for orchestrating an illegal mortgage fee-shifting scheme.  Eghbali had an agreement with escrow company New Millennium Escrow, Inc. to reduce the escrow fees charged to his price-conscious customers and make up for the loss by overcharging other customers.  In return, Eghbali referred nearly all of his clients to New Millennium.  The scheme enabled Eghbali to close more loans and increase his commissions.  CFPB

May 13, 2016

Buffalo, New York-based M&T Bank Corp agreed to pay $64 million to settle charges it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements.  Specifically, the government alleged that M&T Bank failed to comply with certain FHA origination, underwriting and quality control requirements.  DOJ

May 9, 2016

New York announced that Steven Croman, a major New York City landlord with more than 140 apartment buildings across Manhattan, surrendered on multiple felony charges for his role in an alleged scheme to fraudulently obtain several multi-million dollar refinancing loans between 2012 and 2014. Croman was also named, along with private investigator Anthony Falconite, in a civil suit filed by the Attorney General’s office for allegedly engaging in illegal, fraudulent, and deceptive conduct in connection with Croman’s real-estate business. The lawsuit alleges that Croman directs an illegal operation that wields harassment, coercion, and fraud to force rent-regulated tenants out of their apartments and convert their apartments into highly profitable market-rate units. The lawsuit further alleges that Croman deployed Falconite, a former New York City police officer, to frighten and intimidate rent-regulated tenants into surrendering their apartments. NY

April 15, 2016

New Jersey-based Freedom Mortgage Corporation agreed to pay $113 million to resolve allegations it violated the False Claims Act by knowingly originating and underwriting single family mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements for the FHA insurance program.  DOJ