May 31, 2016

California-based mortgage company First Mortgage Corporation (FMC), along with six senior executives, will pay $12.7 million to settle charges that they orchestrated a scheme to defraud investors in the sale of residential mortgage-backed securities guaranteed by the Government National Mortgage Association (Ginnie Mae).  FMC is a mortgage lender that issued Ginnie Mae RMBS backed by loans it originated.  The SEC alleges that from March 2011 to March 2015, FMC and its senior-most executives pulled current, performing loans out of Ginne Mae RMBS by falsely claiming they were delinquent in order to sell them at a profit into newly-issued RMBS.  According to the SEC’s complaint, FMC purposely delayed depositing checks from borrowers who had been behind on their loans, falsely claiming to both investors and Ginnie Mae that such loans remained delinquent when in reality they were current.  After repurchasing at prices applicable to delinquent loans, FMC was able to resell the loans into new Ginnie Mae RMBS pools at higher prices applicable to current loans for an immediate, nearly risk-free profit.  FMC’s Chairman and CEO Clement Ziroli Sr., President Clement Ziroli Jr., CFO Pac Wong, Senior VP Ronald Vargas, Senior VP Scott Lehrer, and Servicing Department Managing Director Edward Joseph Sanders will pay collectively over $1 million to settle the SEC’s charges.  SEC

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