AS OF MARCH 29, 2010 ALL HUD/FHA APPLICATION AND RENEWAL FEES ARE TO BE PAID ONLINE
FACTS
In an effort to expand the electronic payment process for lenders, effective March 29, 2010 (ML10-12), FHA is requiring lender applicants to submit their lender application fees online. Payment of the lender approval application fee, lender approval conversion fee, and lender branch office fee by check (to a designated lockbox) has been replaced with the Department of Treasury's pay.gov system at:
If you have questions regarding this mortgagee letter, please call the FHA Resource Center at 1-800-CALL-FHA (1-800-225-5342). Persons with hearing or speech impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).
MORAL
Pay attention for those of you opening new branches.
HUD/FHA DISCIPLINE - "LEARN FROM THOSE THAT HAVE BEEN BURNED"
FACTS
RSA FINANCIAL, INC. OF ATLANTA, GEORGIA AND 1ST ALLIANCE MORTGAGE, LLC OF HOUSTON, TEXAS PERMANENTLY LOSE HUD APPROVAL
On April 1, 2010 The Federal Housing Administration (FHA) announced that it is permanently withdrawing its approval of Atlanta-based RSA Financial, Inc. and 1st Alliance Mortgage LLC of Houston, Texas. The actions prevent these lenders from originating and underwriting new FHA-insured mortgages or from participating in the FHA single family insurance program. The U.S. Department of Housing and Urban Development's Mortgagee Review Board (MRB) also voted to impose a $15,000 civil penalty against RSA and seek $267,900 from 1st Alliance.
HUD's MRB cited RSA for misleading HUD that it was properly licensed by the Georgia Department of Banking and Finance AT THE TIME THE COMPANY SUBMITTED AN APPLICATION TO FHA for lender approval. In addition, the MRB alleges that RSA submitted false and/or misleading information regarding the criminal conviction and sanction history of its owner and executive, Ramsey Suphi Agan.
HUD claims 1st Alliance engaged in prohibited branch arrangements, provided false certifications, failed to implement a Quality Control Plan, and a number of other violations of HUD/FHA standards.
RSA FINANCIAL, INC., ATLANTA, GEORGIA
The permanent withdrawal of RSA's FHA approval is based upon violations set forth in a Notice of Violation dated December 4, 2009. RSA's application to FHA contained false and/or materially misleading information in connection with RSA's failure to obtain proper licensing in the State of Georgia and in connection with Agan's history of criminal convictions and administrative sanctions. Specifically, RSA represented that company officials "are neither currently, nor have ever been, debarred, sanctioned, fined, convicted, denied approval, or refused a license by any State, Federal, or local government agency." Agan has been suspended and debarred by HUD on at least two occasions and has two felony convictions.
In 1982, Agan pleaded guilty to two counts of knowingly submitting false statements for the purposes of influencing the actions of a federally insured bank. He was sentenced to two years in prison (suspended), two years of probation, and fined $10,000. These actions led to the permanent withdrawal of his former FHA-approved company, Adana Mortgage Bankers, and a five-year debarment of Agan. In 1988, Agan was convicted of multiple counts of bribery by a Georgia Court, causing HUD to debar Agan indefinitely. RSA has 30 days to challenge the withdrawal action before an administrative law judge.
1ST ALLIANCE MORTGAGE LLC, HOUSTON, TEXAS
The permanent withdrawal of 1st Alliance's FHA approval is based on violations set forth in a Notice of Violation dated October 21, 2009. The MRB alleges that 1st Alliance used independent contractors to originate 708 loans from branch offices that were not true branches of the company and then falsely certified these contractors were full-time employees of the company. The MRB also contends 1st Alliance failed to adopt and maintain a required Quality Control Plan; failed to report employee compensation on IRS Form W-2; charged consumers unallowable, excessive or duplicative loan processing and origination fees; and failed to properly ensure that fees "paid outside of closing" were listed on borrowers HUD-1 Settlement Statements.
In addition to the withdrawal actions noted above, HUD also announced two settlement agreements with FHA-approved lenders to resolve alleged violations of HUD/FHA requirements:
FRANKLIN FIRST FINANCIAL, LTD., MELVILLE, NEW YORK
Franklin First Financial, Ltd. (FFF) agreed to pay a civil penalty to HUD in the amount of $413,500 and indemnify HUD for any losses which have been or may be incurred with respect to 31 FHA-insured mortgages. HUD and the Melville, New York-based lender agreed that the company will pay FHA for any losses related to these loans if they are in default or go into default for up to five years after they were endorsed. FFF shall also reimburse 78 borrowers the cost of duplicate appraisals and appraisal reviews that the company performed in order to sell these mortgages on the secondary market.
PARAMOUNT BOND AND MORTGAGE CO., INC., ST. LOUIS, MISSOURI
Paramount Bond and Mortgage Co., Inc. (Paramount) agreed to pay a civil penalty to HUD in the amount of $68,500 and indemnify HUD for any losses which have been or may be incurred with respect to seven FHA-insured mortgages. HUD and the St. Louis-based mortgage lender also agreed that the company repay FHA $146,397 in insurance claims already paid on two loans.
Within the past year alone, FHA has suspended several high-volume FHA-approved lenders, including Taylor, Bean and Whitaker and withdrawn FHA-approval for 354 others, including Lend America and Financial Mortgage USA. That is a significant increase over 2008, when only 28 lenders lost their FHA-approval. (HUD1064, 4110)
RESIDENTIAL HOME FUNDING CORPORATION, GAITHERSBURG, MARYLAND
Residential Home Funding Corporation has one office located in Gaithersburg, Maryland. HUD-OIG selected Residential Home Funding Corporation because its default rate was significantly higher than the average default rate for the State of Maryland.
For five loans reviewed, Residential Home Funding Corporation did not properly verify or support the borrowers' income. These deficiencies stemmed from Residential Home Funding Corporation's misinterpretation of HUD requirements related to verification of employment/income.
We recommend that HUD's Deputy Assistant Secretary for Single Family Housing require Residential Home Funding Corporation to INDEMNIFY MORE THAN $1.6 MILLION FOR FIVE LOANS, which it issued contrary to HUD's loan origination requirements and refer Residential Home Funding Corporation's principals and underwriting staff to HUD's Mortgagee Review Board for administrative sanctions as appropriate. (Audit Report No.: 2010-PH-10014)
SOMERSET INVESTORS CORPORATION, MELVILLE, NEW YORK
Somerset Investors Corporation (Somerset), dba Somerset Mortgage Bankers, a Federal Housing Administration (FHA)-approved direct endorsement lender located in Melville, NY was audited by HUD-OIG to determine whether Somerset (1) originated FHA-insured refinanced loans in accordance with the requirements of HUD/FHA and (2) conducted quality control reviews that complied with HUD/FHA requirements.
Somerset did not always originate refinanced loans in accordance with HUD/FHA requirements. Specifically, 8 of 11 loans we reviewed exhibited underwriting deficiencies significant enough to warrant indemnification as did six loans subject to Somerset's quality control review. Consequently, 14 mortgage loans with an outstanding principal balance of over $4.6 million were approved, which presented an unnecessary risk to the FHA insurance fund.
Somerset's written quality control plan complied with HUD/FHA requirements; BUT, the quality control reviews conducted did not comply with HUD's and its own quality control requirements regarding sample size and reporting Consequently, assurance was lessened that Somerset's quality control process would identify and address underwriting problems in a timely manner and thus protect Somerset and FHA from unacceptable risk.
HUD-OIG recommended that HUD require Somerset to (1) indemnify HUD for potential estimated losses of nearly $2.8 million for 14 loans with significant underwriting deficiencies, (2) strengthen controls over its underwriting procedures to provide assurance that HUD/FHA requirements are met, and (3) implement procedures to ensure that quality control reviews comply with HUD/FHA requirements.
MORAL
They all involve the audit procedure that all HUD approved mortgagees should be following and what I have lectured on in numerous seminars including the upcoming one in Las Vegas on May 6, 2010. Either your HUD Quality Control Manual is not up to date or the person conducting the quality control is not complying with the manual, leaving your company at risk for millions of dollars as seen above.
1. Be sure your application is correct and does not have disbarred, disciplined or convicted felons or those under criminal charges in charge or employed. (see 4060.1 Rev 2, 2-10)
2. The "Compare Ratio" changes once per month. Be sure to review it and any new defaults.
3. Audit all files that go into default. This is in addition to the 10% normal review.
4. Check the employees you hire. Hire the wrong one and you may find yourself disciplined like First Alliance or others. This means run the criminal background check legally. Remember it is your business and your livelihood.
5. If you would like us to audit your facility for you, then give us a call.
SCOTTSDALE, ARIZONA DISCOUNT MORTGAGE RELIEF, A LOAN MODIFICATION FIRM RAIDED BY FBI ON APRIL 1, 2010
FACTS
State and Federal authorities with search warrants arrived at Discount Mortgage Relief, 14000 N. Pima Road, Scottsdale, about 8 a.m. Thursday, April 1, 2010. Arizona's Better Business Bureau has given Discount Mortgage Relief an "F" rating after receiving more than 90 customer complaints. "Our company receives about 1,000 calls a day," said Stacey Pearson, a company spokesperson. "Ninety-five percent of the people we talk to receive help."
Discount Mortgage Relief continued operations Friday morning, April 2, 2010. Pearson said the company has lawyers working with the Attorney General's Office to sort out the situation. "This business is very open to crime," Pearson said. "We are absolutely not one of those companies." (azrep4210)
MORAL
Question: How could attorneys be working with the Arizona Attorney General only when the FBI was part of the search? I have seen the statements made in other cases where people have been indicted and/or sued where the representations of 95% have been made but never proven. I hope she has the proof. Remember, a search warrant is not an indictment and people are innocent until proven guilty BUT if I were working there, I would find legal counsel immediately for myself. If you need one I have an Arizona counterpart.
FOUR ARIZONA DEFENDANTS THAT PLEADED GUILTY IN NOVEMBER 2009 SENTENCED TO FEDERAL PRISON-THAT MAKES 49 THAT WERE INVOLVED WITH THIS MORTGAGE FRAUD SCHEME
FACTS
On March 26, 2010 Four defendants--Jeffrey Todd Crandell, 32, of Gilbert, Ariz., Jake David Abegg Whitman, 33, of Gilbert, Ariz., Frederic Charles Crum, 37, of Gilbert, Ariz., and Tyson Kent Young, 30, of San Tan Valley, Ariz.--were sentenced by U.S. District Judge G. Murray Snow for their respective roles in a multi-million dollar mortgage fraud scheme.
Crandell and Whitman were the leaders of the scheme. In 2005, they obtained the rights to various parcels of real estate located in Chandler, Gilbert, and Queen Creek, Ariz., obscured their interest in those properties by placing them in the name of relatives or in corporate shells, and then recruited friends and acquaintances to buy the properties for inflated prices--often hundreds of thousands of dollars more than the cost of the land. Crandell or Whitman also acted as the mortgage broker in most of the transactions. In that capacity, they were responsible for preparing the buyers' loan applications. They included multiple lies in the applications in order to persuade the lender to approve the loans. Among other things, they inflated the buyers' incomes and assets and stated--falsely--that the buyers would be making the down payment. In fact, at closing, Crandell or Whitman would supply the down payment on behalf of the buyer and also provide a cash kickback to the buyer. All told, this scheme caused federally-insured banks to provide more than $6 million in loans and to suffer more than $1 million in losses after the properties fell into foreclosure.
The remaining defendants played supporting roles in the conspiracy. Crum acted as the mortgage broker for three properties and, in that capacity, prepared false loan applications and created doctored financial statements that overstated the buyers' assets. Young agreed to pose as the owner of several properties in order to obscure Crandell's interest.
Judge Snow sentenced the two leaders of the conspiracy, Crandell and Whitman, to 62 months' imprisonment and 10 months' imprisonment, respectively, with Whitman receiving a lesser sentence due to his early guilty plea and cooperation with the prosecution. Meanwhile, Crum received a sentence of four months' imprisonment and Young received deferred prosecution. (One remaining defendant, Erin Michelle Leastman, 28, of Gilbert, Ariz., is scheduled to be sentenced on April 1, 2010. Leastman acted as the escrow agent in all but one of the transactions.) (usattyaz32910)
MORAL
Giving the buyer or borrower cash back without telling the lender is a felony. Good luck to the real estate brokers that give part of their commission back to the buyer without disclosing it to the lender.
IN CALIFORNIA THE RIGHT OF FIRST REFUSAL DOES NOT STOP A PARTITION ACTION
FACTS
Plaintiff sued to seek partition by sale of a vacation home at Lake Tahoe that he owned with someone else as tenants in common. The trial court determined that the right of first refusal on the tenancy in common (TIC) agreement waived the right to partition and entered judgment in favor of defendant co-owner. The Court of Appeals reversed and remanded. The Appeals court held the right of first refusal in the TIC agreement modifies the statutory right to partition, but does not permanently waive it. (Legg Inv. vs. Boxler, CA4th, 4-1-10, 3rd Dist. Nos. C058743, C059785)
MORAL
Unless you absolutely waive the right to partition the property, any co-owner has the right to sue for partition. If one wants to sell and the other does not, then it is sold.
GRISELDA FLORES, 50 OF CERES, CALIFORNIA ARRESTED FOR SELLING HOME SHE DID NOT OWN
FACTS
On Monday, March 29, 2010 Griselda Flores, 50 of Ceres who posed as a real estate agent and forged signatures to swipe $80,000 from an unsuspecting Spanish-speaking couple who thought they were buying a Modesto home was arrested pursuant to an arrest warrant. The Stanislaus District Attorney's office real estate fraud unit charged her with grand theft, forgery and impersonating a real estate agent. Bail is $25,000.00.
Flores, who is bilingual, gained the victims' trust over several years while preparing their taxes at her Ceres office, the warrant says. She showed them a few houses and arranged to sell one whose owner faced foreclosure at 2021 Ridgecrest Drive for $98,000, accepting an $80,000 cash down payment, the document says. The couple believed that Flores would arrange an $18,000 loan for them, they told investigators. Instead, Flores forged receipts to fool them and arranged to buy the home for $80,000 in her name using a 3 percent down payment and a falsified loan application, the document states.
Flores tried to cover her tracks by telling the couple their down payment had been frozen by Santa Clara County authorities, the warrant says. But the victims complained to local fraud investigators who tipped off the lender and title company involved in the transaction, the document states. (modb4210)
MORAL
That is the height of stupidity. Remember, she is innocent until proven guilty but leaving that large a paper trail makes proving innocent difficult.
MARK ANTHONY MCBRIDE OF GEORGIA DRAWS OVER 16 YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD AND DELAY OF FORECLOSURES
FACTS
On April 1, 2010 Mark Anthony McBride, 44, a/k/a "Charles Conley," "Charles Conley, Jr.," and "Manuel Evans," of East Point, Ga., was sentenced by United States District Court Judge Jack T. Camp on charges of conspiracy to commit bank, mail, wire, and bankruptcy fraud. McBride was also sentenced for violating the terms of his supervised release on a prior federal mortgage fraud conviction.
U.S. Attorney Sally Quillian Yates said, "The lengthy sentence imposed in this case reflects the damage this defendant did to dozens of banks, including the now-failed Omni National Bank, as well as his ABUSE OF U.S. BANKRUPTCY COURTS IN THREE STATES FROM HIS FRAUDULENT FILINGS DESIGNED TO DELAY PROPERTY FORECLOSURES."
McBride was sentenced to 16 years and two months in prison, to be followed by five years of supervised release, and ordered to pay $2,197,929 in restitution on the charges related to his latest mortgage fraud. He was also sentenced to a consecutive two years in prison for violating supervised release on his prior mortgage fraud conviction.
McBride pleaded guilty to the new charges and admitted his supervised release violations on April 24, 2009.
In 2001, immediately upon release from prison on a prior bank fraud conviction, McBride began a mortgage fraud scheme that continued until 2002, when he reported for service of another federal prison sentence. In that scheme, McBride used unqualified borrowers to obtain fraudulently inflated loans. When he was released again from prison in November 2006, McBride was placed in a halfway house. The evidence showed that while under supervision at the halfway house, he was able to attend his own fraudulent loan closings. After his release from the halfway house, McBride continued his scheme of obtaining fraudulent mortgage loans, vehicle loans, lines of credit, credit cards, and other extensions of credit in his name, in his aliases, in the names of numerous stolen identities, and in the identities of other unqualified borrowers. These fraudulent loans continued until McBride was arrested in September 2008 for violating his supervised release. Dozens of banks and other lenders, including the now-failed "Omni National Bank," funded fraudulent loans for McBride.
McBride generated mortgage loan proceeds for himself using inflated valuations for properties securing the loans, and shared those proceeds with his straw borrowers and other conspirators. He was able to retain fraud proceeds by filing eight fraudulent bankruptcy cases in Georgia, Alabama, and South Carolina. The last such fraudulent filing was a May 2008 petition in Atlanta, filed in a bogus name and stolen Social Security Number. The petition falsely stated he had never filed bankruptcy in the past.
Additional Omni-related prosecutions to date include:
Jeffrey L. Levine, 68, of Atlanta, who pleaded guilty on January 14, 2010, to causing materially false entries that overvalued bank assets to be made in the books, reports, and statements of Omni, is scheduled to be sentenced on May 25, 2010, at 10:00 a.m. before United States District Judge Jack T. Camp.
Delroy Oliver Davy, 37, of Lithonia, Ga., was charged in criminal information on December 18, 2009, with bank fraud and conspiracy to commit bank, mail, and wire fraud in connection with a scheme to fraudulently obtain millions of dollars of mortgage loans from Omni and other lenders. A guilty plea is scheduled for May 11, 2010, at 2 p.m. before United States District Judge Jack T. Camp.
Brent Merrill, 37, of Atlanta, pleaded guilty to making false statements to the Federal Deposit Insurance Corporation (FDIC) and aggravated identity theft on March 23, 2010. When facing foreclosure on 14 properties, Merrill attempted to arrange "short sales" in the names of people whose identities had been stolen to obtain forgiveness from the FDIC of $2.2 million in Omni loan payoffs. He is scheduled to be sentenced on May 25, 2010, at 10:00 a.m. before United States District Judge Jack T. Camp. (usattyndga4110)
MORAL
You might call McBride a professional crook? Or professionally stupid. However for the next 18 years (16 + 2 consecutive years) he will have a chance to learn a new vocation, maybe in federal prison.
PARALEGAL SENTENCED IN MANHATTAN, NEW YORK FEDERAL COURT TO THREE YEARS IN PRISON FOR MULTIMILLION-DOLLAR MORTGAGE FRAUD AND FORECLOSURE RESCUE SCHEMES
FACTS
On March 25, 2010 MARINA DUBIN, a real estate paralegal, was sentenced to two concurrent three-year prison sentences in connection with her involvement in a multimillion-dollar, sub-prime mortgage fraud scheme and another foreclosure rescue scheme. DUBIN, 33, of Brooklyn, New York, pleaded guilty to two counts of conspiracy to commit mail, wire, and bank fraud on June 12, 2008, before United States District Judge RICHARD J. HOLWELL, who also imposed the sentence yesterday in Manhattan federal court.
According to the Indictment, other documents filed in these and related cases and statements made in court:
The Mortgage Fraud Scheme
From 2004 through January 2007, DUBIN was a paralegal who acted as the bank attorney and settlement agent for numerous loans obtained by the participants in a wide-ranging mortgage fraud scheme. The scheme was led by ALEKSANDER LIPKIN, 31, of Brooklyn, New York, and other participants included mortgage brokers and loan processors who worked at the Brooklyn mortgage brokerage firm AGA Capital NY, Inc. ("AGA Capital") and its successors, as well as real estate appraisers, loan account executives, a lawyer, straw buyers, and others. DUBIN and her co-defendants submitted loan applications containing false information and material omissions, as well as other false documentation such as bank statements, to obtain loans that otherwise would not have been funded.
During the course of the mortgage fraud scheme, AGA Capital and its successors brokered over 1,000 home mortgages and home equity loans with a total face value of at least $200 million dollars and earned at least $4 million in commission fees on those loans. The various lenders defrauded by the scheme have claimed actual losses of approximately $11.6 million on loans that have completed foreclosure.
Of the 27 DEFENDANTS CHARGED IN THIS CASE (United States v. Aleksander Lipkin, et al.), 25 pleaded guilty; one of the defendants, attorney ALEXANDER KAPLAN, 35, of Brooklyn, New York, was found guilty following a jury trial and is scheduled to be sentenced on April 6, 2010.
GARRI ZHIGUN, 33, of Brooklyn, New York, who supervised the operations of AGA Capital and was LIPKIN's business partner, was sentenced on May 28, 2009, by Judge HOLWELL to 100 MONTHS IN PRISON, three years of supervised release, and was ordered to FORFEIT $2.5 MILLION AND PAY APPROXIMATELY $11.6 MILLION IN RESTITUTION.
The Foreclosure Rescue Scheme
From November 2003 through April 2005, MAURICE McDOWALL, 55, of Brooklyn, New York, LIPKIN and DUBIN engaged in a fraud scheme targeting homeowners whose homes, primarily in Brooklyn and Bronx, New York, were in foreclosure or facing foreclosure, by offering them a plan to "save" their homes. The proposed plan included the refinancing of the homeowners' debt with new, larger mortgages. Because the distressed homeowners typically had poor credit and were not eligible to refinance their debt at favorable terms, the defendants induced them to "sell" their homes to straw buyers, who would apply for loans to be used to "save" the home. The defendants promised that once the straw buyer obtained the mortgage, the proceeds would be used to pay off the homeowners' old debt and make one year's worth of payments on the new loans. The homeowners were told that, during that year, they could continue to live in their homes and work on improving their finances and credit. Finally, the defendants explained to the homeowners that, at the end of the year, the title to their homes would be returned to them by the straw buyers, with their credit repaired and their homes saved. There were also cases in which the defendants did not explain to homeowners that the plan to "save" their home required them to deed their house to a third party and did not obtain permission to deed the homes to others. In such cases, the defendants effectively stole the property of the homeowners by forging the homeowners' signatures on various documents that transferred the homes to straw buyers without the homeowners' knowledge.
McDOWALL, who directed the daily operations of the scheme, and LIPKIN, a mortgage broker who coordinated the submission of fraudulent information to lenders on behalf of straw buyers, obtained more than 80 home mortgages and/or equity loans valued at over $20 million. In some instances, the defendants failed to make even one payment on the loans, causing the loans to default immediately; in nearly every other case, they eventually failed to make the payments and defaulted on the loans, thereby "cashing out" on the properties. As a result, the distressed homeowners lost the titles to their homes and faced eviction, the straw buyers owed the lenders hundreds of thousands of dollars that they were unable to repay, and the lenders suffered losses from the defaulted loans.
DUBIN served as the settlement agent for the vast majority of the fraudulent loans obtained in the course of the scheme. In that capacity, she organized closings, prepared documents, and disbursed the fraudulently obtained proceeds to various defendants.
McDOWALL was previously sentenced by United States District Judge ROBERT P. PATTERSON to 120 months in prison and three years of supervised release, with 100 hours of community service to be performed in the first year after release. In addition, Judge PATTERSON ordered McDOWALL to forfeit $2.5 million.
Of the three other defendants charged in this case, one pleaded guilty and the other two were found guilty on charges of conspiracy, wire fraud, and bank fraud, following a 12-day jury trial in Manhattan federal court.
LIPKIN was sentenced by Judge HOLWELL for his role in both the mortgage fraud scheme and the foreclosure rescue scheme (United States v. Maurice McDowall, et al.) on June 4, 2009, to 110 months in prison, five years of supervised release, and was ordered to forfeit $7 million and pay approximately $11.6 million in restitution.
In addition to the 36-month prison term, DUBIN was sentenced to three years of supervised release. Judge HOLWELL also ordered DUBIN to forfeit $7 million and pay approximately $11.6 million in restitution. (usattysdny32610)
MORAL
Now you might ask what is the difference between forfeiture and restitution. Restitution is what the lender or investors lost and the defendant is ordered to pay every penny even when it is known he never will have the money to do it. HOWEVER, forfeiture is where the defendant has known existing assets and the Government goes in and TAKES IT AWAY FROM HIM. Forfeiture really hurts.
GARTH CELESTINE, 44 OF BROOKLYN, NEW YORK PLEADS GUILTY TO MORTGAGE FORECLOSURE FRAUD
FACTS
On March 30, 2010 Garth Celestine, 44 of Brooklyn, New York formerly an owner of Home Savers Consulting Corp., pleaded guilty to conspiracy to commit wire fraud in connection with a mortgage fraud scheme that falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit, Celestine was remanded to the Hudson County Correctional Facility pending his sentencing, which is scheduled for July 12, 2010, at 10:30 a.m.
On August 5, 2009, Celestine was arrested pursuant to a Complaint along with former Home Savers co-owner Phil A. Simon.
According to the Information to which Celestine pleaded guilty, other documents filed in this case, and statements made during Celestine's guilty plea proceeding:
Celestine and Simon owned and operated Home Savers, which held itself out as a foreclosure rescue company, at 946 Fulton Street, Brooklyn, New York, and 350 North Main Street, Freeport, New York. Celestine and Simon allegedly conspired with each other and others to defraud both homeowners facing foreclosure and mortgage lenders by making materially false representations and promises.
Celestine admitted that, doing business as Home Savers, he and his partner Simon advertised to homeowners and promised to help them avoid foreclosure, keep their homes, and repair their damaged credit. Celestine told the homeowners that they could avoid foreclosure by signing contracts of sale and transferring title to their homes to individuals who would act as "straw buyers" of the properties. Celestine promised the homeowners that after they transferred their title to these straw buyers, Home Savers would improve their credit ratings, help them obtain more favorable mortgages on their homes, and ultimately direct the straw buyers to transfer the title to their homes back to the homeowners within six months to one year. Celestine and Simon typically told the homeowners that the equity withdrawn from their properties would be kept in a separate account and used to pay the mortgages and expenses on their homes.
After the homeowners were signed up, Celestine and Simon recruited individuals with good credit scores to act as straw buyers and paid them about $10,000 per property. Using the homeowners' properties and the good credit ratings of the straw buyers, Celestine and Simon applied for mortgages in the names of the straw buyers to extract the maximum available equity from the homes.
To increase the credit-worthiness of the straw buyers and to ensure they would be approved for the loans, Celestine and Simon submitted to the mortgage lenders loan applications that contained false personal and financial information about the straw buyers, such as their stated employment history and income; they also falsely represented to the mortgage lenders that the straw buyers intended to occupy the property that would secure each mortgage loan as their primary residence, when, in fact, the homeowners would continue to reside in their homes. After each homeowner's debt was paid off and other fees were satisfied, Celestine and Simon deposited the remainder of the loan proceeds into the bank accounts of Home Savers, 527 Maple Court Corporation, 858 Atlantic Avenue Corporation, and Keep What's Yours, Inc.--companies that he and Simon owned and controlled.
Celestine admitted that as a result of their actions, he and Simon fraudulently obtained more than $1 million and caused the mortgage lenders to fund dozens of fraudulent loans worth more than $10 million.
The charge to which Celestine pleaded guilty carries a maximum statutory penalty of 20 years in prison and a $250,000 fine, or twice the pecuniary gain or loss from the offense. Parole has been abolished in the federal system. Defendants who are given custodial terms must serve nearly all of that time.
The investigation is continuing. (usattynj33010)
MORAL
The investigation is continuing means that there are others and are you one of them? Do not get involved in mortgage foreclosure rescue or loan modifications. They are "hot buttons" for law enforcement and I can tell you I am aware of several investigations going down right now. If you are involved or have been involved in loan modifications or stopping foreclosures on a large scale I suggest you see your attorney now for "damage control."
EX-LOAN OFFICER FROM PORTLAND, OREGON DRAWS 24 MONTHS FOR AGGRAVATED IDENTITY THEFT IN MORTGAGE FRAUD SCHEME
FACTS
On March 29, 2010 Kamau Herndon, 38, of Portland, Oregon, was sentenced by U.S. District Judge Garr M. King to serve 24 months in prison after pleading guilty to a charge of aggravated identity theft. Herndon must also serve one year of supervised release following his prison term. The defendant was ordered to report to the custody of the Bureau of Prisons on June 1, 2010.
Herndon, a former loan officer at Lighthouse Financial Group in Vancouver, Washington, was indicted February 19, 2009, on aggravated identity theft charges after he submitted three materially false loan applications to purchase homes for his girlfriend. The applications totaled more than $1.5 million for homes located in Milwaukee and Portland, Oregon and Edmonds, Washington. (usattyor33010)
MORAL
He worked in Washington for the mortgage group. Seems like you need to screen your loan officers better.
ESSJA, SAMUEL "SAM" AGHA OF TEXAS SENTENCED TO 51 MONTHS FOR MORTGAGE FRAUD SCHEME AND PAY OVER $4 MILLION IN RESTITUTION
FACTS
On April 1, 2010 Esshan Samuel "Sam" Agha, 38, of Grapevine, Texas was sentenced to 51- months in federal prison for his role in a mortgage fraud scheme in the Eastern District of Texas
Esshan Samuel "Sam" Agha pleaded guilty on Oct. 19, 2009, to conspiracy to commit mail fraud and was sentenced to 51 months in federal prison today by U.S. District Judge Marcia Crone. Agha was also ordered to pay restitution in the amount of $4,127,131.50.
From Oct. 2005 to Feb. 2008, Agha, a real estate investor, devised a scheme in which he solicited others to buy homes that in most cases were in fact owned by himself or an unnamed co-conspirator. A smaller number of homes were also owned by a third party for whom Agha brokered the sales. Agha facilitated the scheme by making false statements that included misrepresentations such as overstating the buyers' income and stating that the buyers intended to occupy the homes as their primary residence. All of the loans involved in the scheme went into default when the buyers failed to make the mortgage payments on the homes, which included 24 properties in Collin County and one in Tarrant County. (usattyedtx4110)
MORAL
Here is a new one. Everyone tries the same scheme in the same way or a variation. BUT because the federal mortgage fraud team investigates they are familiar with all of them and know exactly what to look for and where to find it. So the moral! Do not do it. You cannot win.
ROBERT ERNEST BRANCH, 42, A FORMER KIRKLAND, WASHINGTON ATTORNEY AND ESCROW OFFICER CONVICTED OF MORTGAGE FRAUD
FACTS
On April 1, 2010 Robert Ernest Brandt, 42, a former Kirkland attorney and escrow officer, was convicted after an eight day trial in U.S. District Court in Seattle of conspiracy and four counts of wire fraud. When sentenced by U.S. District Judge Richard A. Jones on June 25, Brandt faces up to 20 years in prison and a $250,000 fine.
The Washington State Bar Association disbarred Brandt in 2006 after concluding he had allowed the improper use of his client trust account in the mortgage fraud scheme, and had improperly engaged in transactions in which he had a conflict of interest.
The federal case was indicted as part of "Operation Malicious Mortgage," and the overall investigation was conducted jointly with the Washington State Department of Financial Institutions, the King County Prosecuting Attorney's Office and the Kirkland Police Department.
More than a dozen people, including Brandt, were linked to an extensive mortgage fraud scheme operating in 2004 and 2005. Those who have already pleaded guilty in the scheme include a former bank employee, mortgage brokers, as well as the owner of shell companies involved in "flipping" dozens of properties as part of the fraud.
Ten members of the scheme were charged, six in federal and four in state court. All of the charged defendants pleaded guilty, except for Brandt. A number of the charged co-conspirators testified at trial. The conspirators would identify houses and would use shell companies or third parties to purchase the homes, again. At the same time, they recruited "straw buyers" who would enter into a purchase agreement to buy the same home from the conspirators at an inflated price (a "flip"). The conspirators assisted the straw buyers with phony paperwork for the home loans, making it appear that they were qualified for the mortgage loans and planned to occupy the houses. Members of the conspiracy allegedly falsified numerous documents including appraisals, verifications of deposits, employment verification and closing documents. The conspirators split the proceeds from the fraudulent mortgages, and the straw buyers defaulted on the loans after pocketing as much as $20,000 for their fee. The homes were foreclosed and financial institutions and mortgage lenders suffered substantial losses, estimated to exceed $7 million dollars.
Brandt ran a company called "Escrow Authority," which closed all of the sales of the flipped properties. He permitted other members of the scheme to use money out of his lawyer's trust account to acquire properties. The same properties were then quickly resold to straw buyers for significantly higher prices, and fraudulent loans were obtained to finance the fictitious resales. Brandt also helped create shell companies used as part of the scheme, and signed off on fraudulent settlement statements (HUD forms) provided to lenders that failed to disclose the fraudulent nature of the transactions. (usattywdwa42100
MORAL
Please note "Operation Malicious Mortgage" which is cooperation between ALL law enforcement and licensing agencies nationwide. Note the loans funded six years ago. The government has ten years to prosecute you. So if you had any involvement in loans that were questionable see your lawyer now.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
