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Jade Apartment Complex in Miami Target of $5.6 Million Mortgage Fraud Scheme

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Lilia Casal-Diaz, 42, a real estate attorney, Andres Mendez, 47, and his son, Andy Mendez,  26, who both worked as real estate brokers, Josephine Santana, 57, a mortgage broker, Jose Rafael Martinez, 36, and Basilio Gomez, 52, all of Miami-Dade County, have been sentenced to terms of imprisonment for their participation a multi-million dollar mortgage fraud scheme at the luxury Jade apartment complex, on Brickell Bay Drive, in Miami, Florida. The United States Attorney’s Office for the Southern District of Florida announced the action last week.

According to court documents, the mortgage fraud scheme resulted in more than $5.6 million in mortgage proceeds that were fraudulently obtained from various lending institutions, as well as tax related offenses involving willful failure to declare to the IRS proceeds from such transactions.

According to statements in open court and court documents, the defendants engaged in a multi-million dollar mortgage fraud scheme using straw buyers to purchase residential properties at The Jade apartment complex on Brickell Bay Drive in Miami. As part of the scheme, the defendants submitted mortgage loan applications and supporting documents containing false information to lending institutions. The lending institutions relied on these documents to make mortgage loans to the straw buyers to purchase the residential properties. The defendants then prepared and submitted to the lenders false HUD-1 statements. The defendants created a second version of the HUD-1 statements, listing the actual sales prices, which were provided to the seller.

To conceal and perpetuate the fraud, the defendants made some payments to the condominium association and made some mortgage payments to the lenders to prevent foreclosure and continue to receive rental income for the units. The defendants thereafter diverted the mortgage fraud proceeds into shell companies for their personal use.

On December 7, 2012, Casal-Diaz was sentenced by U.S. District Judge Donald M. Middlebrooks to a year and day in prison, along with one year of home confinement and three years supervised release. Casal-Diaz also was ordered to pay restitution to the IRS of $509,543.36.

Casal-Diaz pled guilty on October 4, 2012 to conspiracy to commit tax fraud, in violation of Title 18, United States Code, Section 371, in connection with creating false documents to conceal from the IRS loan proceeds that were derived from the mortgage fraud scheme.

According to court documents, Casal-Diaz, who practiced law in Coral Gables, falsified HUD-1 documents to support the loan fraud scheme, and then failed to report on IRS Form 1099-S the sales proceeds from the transactions, or otherwise intentionally under-reported such proceeds. In addition, when approached by IRS-CI agents, Casal-Diaz provided the agents with a phony Form 1099-S document, falsely indicating that proceeds from one of the real estate closings was properly reported to the IRS.

Previously, on November 28, 2012 before Judge Middlebrooks, Andres Mendez, Sr. was sentenced to 60 months in prison, to be followed by five years of supervised release. Also on November 28th, Andy Mendez Jr. was sentenced to a year and a day in prison, 18 months of home confinement and five years of supervised release. Both were ordered to pay restitution of $4,232,542.67. Both defendants previously pleaded guilty to conspiracy to commit mail fraud in violation of 18 U.S.C. § 1349, on September 6, 2012.

On October 29, 2012 before Judge Middlebrooks, Josephine Santana was sentenced to 21 months in prison, Jose Rafael Martinez was sentenced to 18 months in prison, and Basilio Gomez was sentenced to 15 months in prison. All three defendants were also sentenced to five years of supervised release and ordered to pay $1,202,861.14 in restitution. Previously, all three defendants pled guilty to conspiracy to commit mail fraud in connection with the Jade mortgage fraud scheme, in violation of Title 18, United States Code, Section 1349.

In a related case, Raquel DeJesus Martinez pled guilty to conspiracy to commit mail fraud and money laundering, in violation of Title 18, United States Code, Section 371, in connection with the same mortgage fraud scheme. Sentencing is scheduled for January 22, 2013 before Judge Middlebrooks. At sentencing, the defendant faces a possible statutory maximum sentence of up to five years in prison and a possible fine of up to $250,000.

In another related case, defendant Jose Arnaldo Rosario, 55, of Miami-Dade County, was sentenced on August 5, 2011 for his role in the scheme. Rosario was sentenced to 46 months in prison, to be followed by 3 years of supervised release. Rosario previously pled guilty to conspiracy to commit money laundering and wire fraud, in violation of Title 18, United States Code, Section 371. Rosario provided false information to the lending institution and received two kickbacks from the purchase of two apartments.

To date, eight defendants have been convicted in connection with this mortgage fraud scheme involving the Jade condominiums.

Fort Lauderdale and Miami Mortgage Fraud Attorney

Contact Fort Lauderdale mortgage fraud attorney Howard N. Kahn, Esq. for legal assistance in matters relating to mortgage fraud. His litigation efforts in the area of mortgage fraud have often resulted in the complete recovery of all loan losses, including legal fees and court costs. You can reach him at 954-321-0176 or online.

Two Pompano Beach Women Sentenced to Jail for Foreclosure Fraud

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Lisa Wright, 46, and Cathy Saffer, 52, of Pompano Beach, Fla., were sentenced recently to serve 66 and 60 months respectively for defrauding homeowners and mortgage lenders as part of a foreclosure rescue scheme, the Justice Department announced. The two women were sentenced in the Southern District of Florida.

Wright pleaded guilty on March 27, 2012, to one count of conspiracy to commit mail and wire fraud, one count of mail fraud and one count of wire fraud.  Saffer was convicted of one count of conspiracy to commit mail and wire fraud, three counts of mail fraud and two counts of wire fraud, following a two week jury trial in July.

According to the indictment and evidence presented at trial, Wright and Saffer operated Foreclosure Solution Specialists (FSS) from 2006 to 2009.  Through FSS, Wright and Saffer targeted homeowners facing foreclosure, advertising that FSS could assist those homeowners in remaining in their homes.  When contacted by distressed homeowners seeking assistance, Wright and Saffer misrepresented to those homeowners that their homes would be sold to investors.  They also claimed that customers could remain in their homes after the sales and promised them an opportunity to repurchase the homes at a later date.   Rather than selling the homes to legitimate investors, Wright and Saffer designed sham sales to straw purchasers whom they paid to participate in the scheme.

According to the indictment and evidence presented at trial, Wright and Saffer paid Florida Certified Public Accountant Barrington Coombs to write a fraudulent letter which falsely vouched for the fraudulent information on various loan applications. Coombs, who was also convicted by the jury, is scheduled to be sentenced Dec. 7, 2012.

Mortgage transactions completed by FSS drew equity out of the homes, which Wright and Saffer pocketed for their own purposes. After doing so, Wright and Saffer allowed the loans to go into foreclosure. Homeowners ultimately lost all of the equity in their homes, and most of the victims were forced to move out of their homes.

Fort Lauderdale Foreclosure Defense Attorney

If you or someone you know is facing a mortgage foreclosure, there are many legal considerations involved in choosing the best approach to protect yourself and your family. Contact Fort Lauderdale mortgage foreclosure attorney Marcy Resnik to discuss how you can defend your legal rights in a foreclosure. You can contact Ms. Resnik online or call her at 954-321-0176.

Mortgage “Hustle” Results in U.S. Lawsuit Against Bank of America

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The United States has filed a civil mortgage fraud lawsuit against Bank of America Corporation and its predecessors Countrywide Financial Corporation and Countrywide Home Loans, Inc.

The Government’s Complaint seeks damages and civil penalties under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 for engaging in a scheme to defraud the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”).

Specifically, the Complaint alleges that from at least 2007 through 2009, Countrywide, and later Bank of America after acquiring Countrywide in 2008, implemented a new loan origination process called the “Hustle,” which was intentionally designed to process loans at high speed and without quality checkpoints, and which generated thousands of fraudulent and otherwise defective residential mortgage loans sold to Fannie Mae and Freddie Mac that later defaulted, causing over $1 billion dollars in losses and countless foreclosures.

Countrywide initiated the Hustle (or “HSSL,” for “High-Speed Swim Lane”) in 2007 through its Full Spectrum Lending Division, just as loan default rates were increasing throughout the country and the GSEs were tightening their loan purchasing requirements to reduce risk.

According to internal Countrywide documents, the goals of the Hustle were high speed and high volume, where loans “move forward, never backward” in the origination process. To accomplish these goals, the Hustle removed necessary quality control “toll gates” that could slow down the origination process. For example, the Hustle eliminated underwriters from loan production, even for many high-risk loans, such as stated income loans.

Instead, the Hustle relied almost exclusively on unqualified and inexperienced clerks, called loan processors. Although loan processors had not been previously considered competent or knowledgeable enough to be permitted even to answer borrower questions, they were now required to perform critical underwriting duties. If a loan processor entered data from a loan file into an automated underwriting system called CLUES and received a rating that the loan had an acceptable risk of default (or “Accept” rating), no underwriter would ever see the loan. The Hustle also did away with compliance specialists, whose job it was to ensure that any loans that were approved with conditions had the conditions satisfied before closing.

Although loan processors were at the time entrusted with much more responsibility, they were given much less guidance. For example, mandatory checklists for performing important underwriting tasks (such as evaluating an appraisal or assessing the reasonableness of stated income) were eliminated. Loan processors were also financially incentivized to put volume ahead of quality, as Full Spectrum Lending changed its compensation plan to provide bonuses based solely on loan volume. Reductions to compensation for poor loan quality were discontinued.

Full Spectrum Lending’s senior management was repeatedly warned that eliminating toll gates for quality control and fraud prevention, and expanding the authority of loan processors and compensating them based on volume without regard to quality, would yield disastrous results. For example, in January 2008, a pre-funding quality review showed an overall defect rate of 57%, and a defect rate of nearly 70% for stated income loans. Full Spectrum Lending senior management, however, made no changes to the Hustle, and instead restricted dissemination of the pre-funding review.

As the warnings about the Hustle went unheeded, Countrywide and later Bank of America knowingly originated loans with escalating levels of fraud and other serious defects and sold them to the GSEs.

This is the first civil fraud suit brought by the Department of Justice concerning mortgage loans sold to Fannie Mae or Freddie Mac.

Fort Lauderdale Foreclosure Defense Attorney

If you or someone you know is facing a mortgage foreclosure, there are many legal considerations involved in choosing the best approach to protect yourself and your family. Contact Fort Lauderdale mortgage foreclosure attorney Marcy Resnik to discuss how you can defend your legal rights in a foreclosure. You can contact Ms. Resnik online or call her at 954-321-0176.

Fort Lauderdale Reverse Mortgage Scam Draws HUD Debarment

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Three South Florida mortgage loan officers and a Pittsburgh title agent are subject to an indefinite debarment by the U.S. Department of Housing and Urban Development (HUD) following their criminal convictions on charges they defrauded elderly borrowers, mortgage lenders and the Federal Housing Administration (FHA).

Marcos Echevarria, Louis Gendason, John Incandela and Kimberly Mackey pled guilty to charges of conspiracy to commit wire fraud for their part in a $2.5 million nation-wide reverse mortgage scam. All four individuals are currently serving prison terms.

HUD’s debarment action effectively bans these individuals from conducting business with the federal government in the future. The Court has also ordered them to make restitution.

“HUD will not tolerate those who abuse the mortgage system and target elderly borrowers for their personal gain,” said HUD Secretary Shaun Donovan. “Reverse mortgages can help senior citizens on fixed incomes plan for the future, but it is shameful to bilk the elderly out of their life savings.”

Echevarria, Gendason and Incandela worked for 1st Continental Mortgage, which maintains offices in Fort Lauderdale and Boca Raton, Florida. According to the government’s complaint, the three used their positions to identify financially vulnerable elderly borrowers and pressured them to refinance their existing mortgages into an FHA-insured reverse mortgage or Home Equity Conversion Mortgage (HECM). A reverse mortgage allows borrowers, who are at least 62 years of age, to convert the equity in their homes into a monthly stream of income, or a line of credit.

The complaint also notes that Kimberly Mackey, a licensed title agent and proprietor of Real Estate One Land Services, Inc., located in Pittsburgh, Pennsylvania, fraudulently closed the loans by failing to pay off the borrowers’ existing mortgages. It further notes that Mackey attempted to conceal the fraudulent loan closings by preparing false HUD-1 settlement documents that showed that the existing mortgages had, in fact, been paid off.

The scheme also involved changing real estate appraisal reports to fraudulently represent equity in the properties. In some cases the scheme also involved negotiating fake short sales defrauding the lenders holding the borrowers’ first mortgages.

Contact a Fort Lauderdale Foreclosure Defense Attorney

If you are at risk of losing your home to foreclosure, there is action you can take. Contact Fort Lauderdale mortgage foreclosure attorney Marcy Resnik to discuss how you can defend your legal rights in a foreclosure. You can contact Ms. Resnik online or call her at 954-321-0176.

 

SEC Charges Thornburg Mortgage with Fraud

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The Securities and Exchange Commission today charged the senior-most executives at formerly one of the nation’s largest mortgage companies with hiding the company’s deteriorating financial condition at the onset of the financial crisis. The plan backfired and the company lost 90 percent of its value in two weeks.

The SEC alleges that Thornburg Mortgage Inc. chief executive officer Larry Goldstone, chief financial officer Clarence Simmons, and chief accounting officer Jane Starrett schemed to fraudulently overstate the company’s income by more than $400 million and falsely record a profit rather than an actual loss for the fourth quarter in its 2007 annual report. Behind the scenes, Thornburg was facing a severe liquidity crisis and was unable to make on-time payments for substantial margin calls it received from its lenders in the weeks leading up to the filing of its annual report on Feb. 28, 2008.

According to the SEC’s complaint filed in federal court in New Mexico, even though Thornburg was violating lending agreements by failing to make on-time payments, the executives were unwilling to disclose the severity of their liquidity crisis to investors and Thornburg’s auditor.

For example, in a February 25 e-mail from Starrett to Goldstone and Simmons, she said, “We have purposefully not told [our auditor] about the margins calls.” Goldstone, Simmons, and Starrett scrambled to satisfy all outstanding margin calls and then timed the filing of the annual report to occur just hours later in order to precede additional margin calls and avoid full disclosure. As Goldstone had earlier stated to Simmons and Starrett in an e-mail, “We don’t want to disclose our current circumstance until it is resolved.” The intention was “to keep the current situation quiet while we deal with it.”

The SEC alleges that the executives’ plan to never disclose the delayed margin call payments fell through when they were unable to raise cash quickly enough to meet more margin calls received soon after filing the annual report. When Thornburg began to default on this new round of margin calls, it was forced to disclose its problems in 8-K filings with the SEC. By the time the company filed an amended annual report on March 11, its stock price had collapsed by more than 90 percent. Thornburg never fully recovered and filed for bankruptcy on May 1, 2009.

Contact Fort Lauderdale securities fraud attorney Howard N. Kahn, Esq. if you or someone you know has been the victim of securities fraud or commercial mortgage fraud. Mr. Kahn is an experienced mortgage fraud and securities litigation attorney. He works with commercial lenders, borrowers, and investors in cases involving mortgage fraud or securities litigation. You can contact him at 954-321-0176 or online.

Mortgage Fraud Accusations for Nationwide Investment

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Nationwide Investment Firm, a Palm Beach County foreclosure rescue firm, is the target of increasing homeowner complaints.

Clients allege that Nationwide promises to arrange short sales, negotiate loan modifications, or work with lenders to delay homeowner foreclosures, according to a lawsuit filed in Palm Beach County. Rather than getting help, however, unsuspecting victims actually sign over the deed to their home to Nationwide.

Seven lawsuits charging fraudulent business practices have been filed against the company in the past year, according to the Palm Beach Post. Nationwide Investment now has title to 65 homes in Palm Beach, Broward, Miami-Dade, St. Lucie and Lee counties, according to the article.

The Florida Office of Financial Regulation confirmed last week that it is conducting an investigation into the firm.

Watch a Channel 5 News video about the mortgage fraud allegations involving Nationwide Investment Firm.

Contact Fort Lauderdale mortgage foreclosure attorney Marcy Resnik or Howard Kahn to discuss how you can defend your legal rights in a foreclosure. You can contact them online or call her at 954-321-0176.

South Florida Men Sentenced in $9 Million Mortgage Fraud Scheme

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An elaborate mortgage fraud scheme ended with defendants Oscar Bravo, 58 of Port St. Lucie, Jorge Bravo, 57 of Miami, and Sean Dickens, 44, of West Melbourne, Florida being sentenced to thirty-seven (37) months in prison on charges of conspiracy to commit mail and wire fraud.

According to a press release issued by the U.S. Attorney’s Office for the Southern District of Florida, a co-conspirator located residential properties for sale. The defendants then purchased the properties, with a plan to flip them for a profit after some property enhancements. The properties were 100% lender financed. The price of the properties was falsely inflated in their mortgage applications with the difference between the actual price and the inflated mortgage loan used to make payments on the mortgage loan and to pay for repairs to the properties.

In total, this mortgage scheme involved approximately $9 million in fraudulent mortgage loans. Click on the link to read the full press release.

Contact Fort Lauderdale mortgage fraud attorney Howard N. Kahn, Esq., if you or someone you know has been the victim of commercial mortgage fraud. Mr. Kahn is an experienced mortgage fraud and litigation attorney. He works with commercial lenders or borrowers in cases involving mortgage fraud or other distressed properties. You can him at 954-321-0176 or online.