In the wake of the housing market's decline, there have been several companies who claim that they can help homeowners restructure their mortgages, but in reality, this is not the case.
The Securities and Exchange Commission has received an emergency court order to stop a scheme and freeze the assets of a Texas resident and his company who allegedly was falsely telling investors that he was using their money to buy and remodify pools of nonperforming residential home mortgages.
The complaint says that James Temme told investors and their advisors, including the bank representative, that the money was being used to purchase “tapes” of nonperforming, distressed or foreclosed mortgages from lenders at a discount and turn them into performing loans. Temme allegedly was going to pay the investors based on principal and interest payments he collected from the homeowners or from the resale of the mortgage properties.
In order to entice investors to participate in this scheme, Temme developed relationships with people and entities that “vouched” for the defendant, the SEC said. Conspirators who supported the defendant included an investment adviser representative with a major investment bank's private wealth management group and a Texas-based public company that provides mortgage restructuring services.
During this scheme, Temme and his company have made several misrepresentations and misappropriated investor funds, the complaint said. The defendant claimed to own mortgages he had never acquired and asserted to purchase the same nonperforming loans to multiple sets of investors.
To carry out this scheme, Temme created false documents, made unauthorized financial transactions and used new investor funds to pay off prior investors. According to the complaint, Temme and Stewardship Fund LP allegedly raised and solicited at least $35 million from investor groups due to this scheme since 2008. The scheme supposedly involved 16 different partnerships and at least 31 entities and individuals.
The SEC claims that Temme violated the Securities Act of 1933 and the Securities Exchange Act of 1934 and wants the defendant to pay financial penalties for the losses the investors suffered from this fraudulent scheme.
“Temme took advantage of investors who believed their investments were helping homeowners restructure their mortgages,” said David Woodcock, director of the SEC's Fort Worth regional office. “In many instances, it appears Temme was just pocketing the investments and using the proceeds for his own illicit purposes.”
This would not be the first violation against Temme, the complaint said, as the defendant has already had at least one state court asset freeze and several other lawsuits by different investor groups filed against him. Despite the previous asset freeze, Temme continued the scheme by opening new bank accounts and raising money from new investors to settle prior lawsuits, the complaint said.
Federal court in the Eastern District of Texas is scheduled to have a hearing on Oct. 27 to decide if it should appoint a receiver and a preliminary injunction against Temme and his company.
As of press time, the defendant's lawyer could not be reached for comment.
