Forget Notice, Face Litigation Risk

NOV 21, 2012 2:38pm ET
Comment (1)

On Nov. 16, Bradford J. Rieger was sentenced in New Haven to 24 months of imprisonment, followed by five years of supervised release, for his role in a multimillion-dollar mortgage fraud scheme in New Haven. Rieger also was ordered to pay a $10,000 fine.

Between approximately 2006 and 2008, Rieger, an attorney with offices in East Haven along with Ronald E. Hutchinson and Menachem Levitin, conspired to defraud mortgage lenders and financial institutions by obtaining millions of dollars in fraudulent mortgages for the purchase of dozens of multi-family properties in New Haven. As part of the scheme, sellers of the properties agreed to accept sale prices that were significantly lower than the contract prices. The lower prices were not disclosed to lenders from which the buyers obtained financing to purchase the properties, and scheme participants submitted to mortgage lenders false HUD-1 forms that often did not match another, undisclosed HUD-1 form that was actually used to disburse the fraudulently obtained proceeds at the closing. As a result of the submission of the false HUD-1 forms and other false documentation in support of the loans, including falsified monthly rental income and fictitious leases, the mortgage lenders would issue mortgages based on the inflated sales prices.

Scheme participants used the fraudulently obtained mortgage proceeds to pay themselves and others. In most of the fraudulent transactions, the buyers did not make any deposits or down payments for the properties they purchased. Rather, the co-conspirators used some of the fraudulently obtained mortgage proceeds to cover the down payments and deposits. In addition, at or shortly after a closing, a borrower would often receive several thousand dollars, although this payment was not disclosed to the lender.

Rieger acted as a closing attorney during 19 fraudulent transactions, which have caused more than $2.2 million in losses to lenders. In connection with many of these closings, Rieger prepared false HUD-1 forms that were submitted to lenders. In some of these transactions, while the HUD-1 form that Rieger sent to the lender indicated that the borrower brought funds to the closing, Rieger actually distributed funds to the borrower.

In total, more than $10 million in fraudulent mortgages on more than 40 properties were obtained during the conspiracy. Many of the houses purchased during the scheme went into default and have been foreclosed upon, causing losses of more than $7 million to lenders.

Rieger pleaded guilty to one count of conspiracy to commit mail fraud, wire fraud, and bank fraud. Hutchison and Levitin also have pleaded guilty. The amount of restitution Rieger will be ordered to pay will be determined after further court proceedings. (usattyct111612)


Take notice of two things, especially the second:

1.  The loans were from six years ago. This means, as I have been informing some of you that have inquired that the federal prosecutors are still working on 2006 and coming forward.

2.  Note that part of the felony was returning money to the borrower after the closing and not telling the lender. How many of you reading this have I explained that too lately? It changes APR, DTI and borrower risk factors. In other words a material misrepresentation.



On Nov. 9, Chad Wegscheider was sentenced to 36 months in federal prison for fraudulently brokering loans in a mortgage fraud scheme.

Wegscheider, who was the owner and president of a Maplewood mortgage brokerage business called Minnesota One, conspired with others to devise a scheme to defraud mortgage lenders. From June 2006 through March 2008, Wegscheider’s co-conspirator recruited straw buyers to purchase newly converted condominiums in Minnesota and Wisconsin at inflated prices with borrowed funds. In many cases, straw buyers bought numerous units in short periods of time.

To trick mortgage lenders into providing loans to investors, Wegscheider prepared loan applications that overstated the bank account balances of the straw buyers and falsely stated that the straw buyers would use their own money to make down payments on the properties, when, in fact, he knew his co-conspirator was providing the down payments. Wegscheider also opened accounts in the names of the straw buyers and deposited his co-conspirator’s money into them in an effort to make it appear to potential lenders that the straw buyers had sufficient cash on hand to make the property purchases. All the loans fraudulently brokered by Wegscheider went into default, causing more than $2.5 million in losses to the lenders. (usattymn11912)


Note that the loans go back to 2006, six years ago. Anyone that did loose loans six years ago to present should consult with their legal counsel now.



On Nov. 13, Peter Wilkinson pled guilty to conspiracy to commit bank fraud and bank fraud charges related to a mortgage fraud scheme in Central Oregon. Wilkinson admitted that he caused financial institutions to lose between $2.5 million and $7 million in bad loans he pushed through as a licensed mortgage broker with his company Deschutes Mortgage Group in Bend, Ore.

Wilkinson and others prepared and submitted fraudulent home loan applications and other false documents to lending institutions to obtain financing to purchase real estate. To convince financial institutions to approve the loans and advance loan funds, Wilkinson and others falsely inflated borrowers’ monthly incomes on home loan applications, omitted borrowers’ liabilities, claimed the financing was for a primary residence and used straw borrowers. Additionally, Wilkinson and others caused large amounts of money, often $100,000 or more, to be deposited into borrowers’ checking accounts to temporarily inflate their account balances, thereby causing borrowers’ banks to generate false verifications of deposit, a document that showed the amount of money in borrowers’ checking accounts. These VODs were used by Wilkinson and others to falsely prove cash reserves, on the part of the borrowers, to the lending institutions as a material part of the loan approval process.

Sentencing is set for Jan. 29, 2013, at 10 a.m. before U.S. District Chief Judge Ann Aiken. The maximum penalty for conspiracy to commit bank fraud and bank fraud is 30 years in prison and a $1 million fine.  (usattyor111312)


Pay particular attention to the facts: False income? False “primary residence.” Then look at the California man above indicted for ONE LOAN ONLY!





Comments (1)
The 'anti-deficiency' notice is being incorporated into the new GFE/TIL and implementation requirements have been delayed until the new form is adopted. 1414(c); 129C(g)(3)
Posted by | Wednesday, November 28 2012 at 10:36AM ET
Add Your Comments:
Not Registered?
You must be registered to post a comment. Click here to register.
Already registered? Log in here
Please note you must now log in with your email address and password.
MultimediaSee All »