Kimberly Mackey, 46, Pittsburgh, Pennsylvania, and Marcos Echevarria, 29, Palm Beach, Florida, were sentenced before U.S. District Court Judge William P. Dimitrouleas for their participation in a $2.5 million Home Equity Conversion Mortgage (a.k.a. reverse mortgage) fraud scheme. Defendants Louis Gendason, 42, Delray Beach, Florida, and John Incandela, 24, Palm Beach, Florida, will be sentenced on December 16, 2011.
Defendant Echevarria was sentenced to 24 months in prison, to be followed by five years of supervised release. Defendant Mackey was sentenced to 60 months in prison, to be followed by five years of supervised release. Restitution was ordered in the amount of $1,654,805.36.
As previously reported by Mortgage Fraud Blog, all of the defendants, including Louis Gendason, 42, Delray Beach, FL, previously pled guilty to a Criminal Information charging them with one count of conspiracy to commit wire fraud, in violation of Title 18, United States Code, Section 1349, for their participation in a $2.5 million Home Equity Conversion Mortgage (a.k.a. reverse mortgage) fraud scheme. Sentencing for Gendason has been scheduled for December 16, 2011 at 1:45 PM before U.S. District Court Judge William P. Dimitrouleas.
A reverse mortgage allows borrowers, who were at least 62 years of age, to convert the equity in their homes into a monthly stream of income, or a line of credit. Unlike the traditional mortgage loan scenario, in which borrowers make monthly payments to a mortgage lender in satisfaction of their outstanding loan, in a reverse mortgage loan scenario, the mortgage lender purchases borrowers equity and makes installment payments to the borrower.
According to the Information and statements made in court, from May 2009 through November 2010, the defendants engaged in a reverse mortgage scheme that defrauded unwitting borrowers, Genworth Financial Home Equity Access, Inc. (Genworth), and the Federal Housing Administration (FHA). Defendants Gendason and Incandela worked as loan officers at 1st Continental Mortgage (1st Continental), with offices in Fort Lauderdale and Boca Raton, Florida.
The defendants, as loan officers for 1st Continental, solicited individuals, ages 62 and older, from around the country to refinance their existing mortgages with a reverse mortgage loan financed by Genworth, located in Rancho Cordova, California. To qualify the borrowers for the loans, Gendason altered real estate appraisals to fraudulently inflate the value of the borrowers properties. In fact, however, none of the borrowers had sufficient equity in their properties to qualify for a reverse mortgage. The defendants then submitted the fraudulently inflated appraisals to Genworth. Based on the false documentation, Genworth approved and the FHA insured more than $2,572,813 in reverse mortgage loans.
As a further part of the conspiracy, defendant Kimberly Mackey, a licensed title agent and proprietor of Real Estate One Land Services, Inc. (REO), located in Pittsburgh, Pennsylvania, fraudulently closed the Genworth loans, failing to pay off the borrowers existing mortgage loans. Genworth wired the loan proceeds to Mackey as the designated closing agent for 1st Continental. 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.
Between May 2009 and November 2010, Mackey received loan proceeds from Genworth totaling $2,572,813.19. Mackey fraudulently diverted at least $988,086.33 to a bank account controlled by Incandela and Gendason, who used this money for their personal benefit.
Thereafter, to perpetuate the fraud, the defendants engaged in a loan modification scheme to conceal the existence of the Genworth reverse mortgage transactions from the original mortgage lenders, whose loans remained unpaid. To this end, Gendason, Incandela, and Mackey conspired to create fictitious offers to buy some of the borrowers properties, in the form of short sales. A short sale is a sale of real estate in which the sale proceeds are less than the balance owed on the loan to the mortgage lender, but avoids foreclosure and related costs. In other instances, to hide the existence of the Genworth reverse mortgage loan from the original lenders, the defendants made monthly mortgage payments to the borrowers original lenders.
Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, Tony West, Assistant Attorney General for the Civil Division of the U.S. Department of Justice, Timothy A. Mowery, Special Agent in Charge, U.S. Department of Housing and Urban Development, Office of Inspector General (HUD-OIG), Jose A. Gonzalez, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division (IRS-CID), Enrique Gutierrez, Postal Inspector in Charge, U.S. Postal Inspection Service, John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office, and J. Thomas Cardwell, Commissioner, State of Florida’s Office of Financial Regulation, announced the sentences.
Mr. Ferrer commended the investigative efforts of HUD-OIG, IRS-CID, the U.S. Postal Inspection Service, the FBI, and the State of Florida’s Office of Financial Regulation. Mr. Ferrer also thanked the U.S. Secret Service and Genworth Financial Home Equity Access, Inc for their assistance in this investigation. The case is being prosecuted by Assistant U.S. Attorneys Jeffrey H. Kay and Thomas Lanigan, and Kevin J. Larsen, a Trial Attorney for the Department of Justice s Office of Consumer Protection Litigation.