DEC 12, 2013 4:15pm ET

Former CEO of Loan Servicer Going to Jail for Bank Fraud

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The former president and chief executive officer of U.S. Mortgage has been sentenced to prison for defrauding Wells Fargo of $8 million, the Department of Justice announced.

Earl Gross, 74, from Las Vegas, pleaded guilty to one count of bank fraud back in June and will now serve 18 months in prison, says U.S. District Court Judge of Nevada Andrew Gordon.  

From 2004 to 2009, Wells Fargo contracted with U.S. Mortgage to service pools of residential mortgage loans held by investors in mortgage backed securities. As part of the agreement, Gross and U.S. Mortgage were obligated to collect from the borrowers monthly payments that were made toward their mortgage and forward these proceeds to Wells Fargo.

If a borrower paid off the loan, which is usually done by selling the mortgaged property, the loan servicing company was supposed to remit to Wells the full payoff amount.  

During the time of the scam, Gross withheld over $8 million in loan payoffs that were due to Wells Fargo, according to an indictment, by submitting bogus reports to the bank stating that numerous borrowers were still making monthly payments when this was not happening.

Instead of remitting the full payoff amount to Wells Fargo, Gross and U.S. Mortgage only provided the financial institution what the borrowers’ monthly payments would have been and retained the difference in their own bank account. To deceive Wells Fargo about the status of paid-off loans, Gross created fake amortization schedules indicating that borrowers who had sold and paid off homes were still making their monthly payments.

Besides withholding loan payoff amounts to which he was not entitled, Gross charged Wells Fargo fees to service mortgage loans that had been paid off.

In addition to his prison term, Gordon ordered Gross to forfeit more than $8.4 million in fraudulent proceeds.

Comments (1)
He steals $8,000,000 and only gets 18 months? No wonder so many preople continue to commit bank fraud.
Posted by JOHN L | Friday, December 13 2013 at 7:59AM ET
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