Housing and Mortgage Fraud

May 15, 2017

The Securities and Exchange Commission today charged James Im and Kee Chan a pair of former head traders who ran the commercial mortgage-backed securities (CMBS) desk at Nomura Securities International Inc. with deliberately lying to customers in order to inflate the profits of the CMBS desk and line their own pockets as a result. The SEC alleges that Im and Chan each misrepresented price information while acting as intermediaries on trades with Nomura’s customers who sought to buy and sell CMBS on the secondary market.  In certain instances, Im and Chan allegedly pretended they were still negotiating bond purchases with a third-party seller at higher prices when Nomura had already acquired the bonds at a lower price. The SEC alleges that in one instance, Im bragged about his purposeful deception of a customer, and Chan once altered an email to a customer to prop up his lie about the bid price for a bond.  According to the SEC’s complaints, Chan and Im fraudulently generated more than $750,000 in extra trading profits for the CMBS desk, and they received substantial bonuses based largely on the desk’s performance. SEC

April 24, 2017

New York announced that nine individuals have been variously charged with money laundering, mortgage fraud, grand larceny, conspiracy, and other charges related to their participation in a scheme to defraud mortgage lenders that spanned two New York City boroughs and resulted in over $1 million in ill-gotten mortgage loans. According to the indictment, from 2012 to 2015, defendants Defreitas, McKayle, Mackey, and Persaud allegedly engaged in a scheme to defraud mortgage lenders and steal mortgage proceeds. In the course of the scheme, the defendants allegedly used sham corporations to acquire title to four properties in Brooklyn and Queens, and then conspired with defendants Downes, Harmon, Whyte, Gregoire, and Blackwood-Sambury to obtain mortgages to “buy” the properties in manufactured resales. The defendants are alleged to have concealed the fact that the buyers couldn’t afford the homes by submitting fraudulent mortgage applications showing grossly inflated incomes from fake jobs, bank accounts with fabricated balances and other false information. NY

April 12, 2017

Peter Novajosky and Kathy Novajosky, doing business as P&K Realty, agreed to pay roughly $35,000 to settle charges of violating the False Claims Act by making false statements to obtain federal funds through the United States Department of Housing and Urban Development (HUD) housing assistance program.  According to the government, the Novajoskys applied for HUD funding without disclosing the tenant to which the requested funding related was their daughter. DOJ (MDPA)

April 20, 2017

The CFPB sued one of the country’s largest nonbank mortgage loan servicers, Ocwen Financial Corporation, and its subsidiaries for years of widespread errors, shortcuts, and runarounds that cost some borrowers money and others their homes. Ocwen allegedly botched basic functions like sending accurate monthly statements, properly crediting payments, and handling taxes and insurance. Allegedly, Ocwen also illegally foreclosed on struggling borrowers, ignored customer complaints, and sold off the servicing rights to loans without fully disclosing the mistakes it made in borrowers’ records. CFPB

March 30, 2017

New Jersey announced that a lawyer from Essex County was found guilty at trial of conspiring with others to steal approximately $873,520 from a lender by using stolen identities to file fraudulent mortgage loan applications for two bogus real estate transactions, falsifying settlement statements and diverting loan proceeds. The state presented testimony and evidence at trial that Hand conspired with others, including Thomas D’Anna, 41, of Saddle Brook, N.J., in two fraudulent real estate sales between January 2009 and April 2009. The sales involved properties at 248 River Road in Garfield and 91 Isabella Avenue in Newark. In both sales, D’Anna, or a company he owned, sold the property, while no actual buyer existed. The defendants used identities stolen from residents of Puerto Rico to apply for loans for the purchases, submitting false bank statements and other false information to support the applications. The lender provided loans of $415,865 for the Garfield property, and $457,655 for the Newark property. Hand was the attorney and settlement agent for both closings. NJ

March 15, 2017

The CFPB ordered Nationstar Mortgage LLC to pay a $1.75 million civil penalty for violating the Home Mortgage Disclosure Act (HMDA) by consistently failing to report accurate data about mortgage transactions for 2012 through 2014. This is the largest HMDA civil penalty imposed by the Bureau to date. In addition, Nationstar must take the necessary steps to improve its compliance management and prevent future violations. CFPB

February 23, 2017

The final defendant in an alleged mortgage relief scam that preyed upon distressed homeowners will be banned from selling mortgage or debt relief services under a settlement with the FTC. The settlement resolves FTC charges against Gabriel D. Stewart in a scheme that operated under the fictitious names “2Apply” and “UW Solutions.” The defendants falsely claimed they could lower consumers’ mortgage payments and interest rates or prevent foreclosure, pretended to be affiliated with a government agency or consumers’ lenders or servicers, and illegally charged advance fees. The case was brought in July 2014 as part of a federal-state law enforcement effort, Operation Mis-Modification. FTC

January 31, 2017

The CFPB took action against Prospect Mortgage, LLC, a major mortgage lender, for paying illegal kickbacks for mortgage business referrals, and two real estate brokers and a mortgage servicer that took illegal kickbacks from Prospect. Prospect will pay a $3.5 million civil penalty for its illegal conduct, and the real estate brokers and servicer will pay a combined $495,000 in consumer relief, repayment of ill-gotten gains, and penalties. CFPB

January 23, 2017

The CFPB took separate actions against CitiFinancial Servicing and CitiMortgage, Inc. for creating obstacles for struggling homeowners seeking options to save their homes. The mortgage servicers kept borrowers in the dark about options to avoid foreclosure or burdened them with excessive paperwork demands in applying for foreclosure relief. CitiMortgage has been ordered to pay an estimated $17 million in compensation and another $3 million in civil penalties. CitiFinancial Services is to refund approximately $4.4 million to consumers, and pay a civil penalty of $4.4 million. CFPB

January 18, 2017

Credit Suisse agreed to pay $5.28 billion to resolve charges it misled investors in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) in the years leading up to the Great Recession. As part of the settlement, the bank agreed to a detailed Statement of Facts describing how it knowingly made false and misleading representations to investors about the characteristics of the billions of dollars of mortgage loans it securitized in RMBS. Whistleblower Insider