Archives For Mortgage Fraud

Andrzej Lajewski, 53, formerly of Wheeling, Illinois, a real estate developer, who owned Des Plaines-based Highland Consulting Corp., and Chicago-based Quality Management and Remodeling Inc., has been indicted with three others for allegedly participating in a mortgage fraud scheme that defrauded financial institutions out of at least $3 million.

According to an indictment returned Jan. 28, 2021, Lajewski schemed with two mortgage professionals and the owner of a remodeling company to fraudulently obtain at least $3 million in mortgage loans by making and causing to be made materially false representations to financial institutions regarding the buyers’ qualifications for the loans. The false representations concerned the buyers’ employment history, income, assets, source of down payment, and intention to occupy the properties, the indictment states.  In some instances Lajewski fraudulently claimed to lenders that the buyers were employed by his companies – even though he knew that was untrue – to help the buyers qualify for the mortgage loans, the indictment states.

The alleged fraud scheme lasted from 2010 to 2016 and involved numerous properties on the South Side of Chicago.

The indictment charges multiple counts of financial institution fraud against Lajewski, and two mortgage professionals – loan originator Agnieszka Siekowski, 46, Northbrook, Illinois and loan processor Aldona Bobrowicz, 45, Arlington Heights, Illinois and the home remodeler, Andrzej Bukowski, 66, formerly of Wheeling, Illinois.  Arraignments for Siekowski and Bobrowicz are scheduled for Friday at 10:00 a.m. before U.S. District Judge Martha M. Pacold.  Arraignments for Lajewski and Bukowski have not yet been scheduled.

The indictment was announced by John R. Lausch, Jr., United States Attorney for the Northern District of Illinois; and Brad Geary, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development, Office of Inspector General.  The government is represented by Assistant U.S. Attorneys Kalia Coleman and Jason Yonan.

The public is reminded that an indictment is not evidence of guilt.  The defendants are presumed innocent and entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.  Each count of financial institution fraud is punishable by up to 30 years in federal prison.  If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory U.S. Sentencing Guidelines.

 

Minnesota Attorney General Keith Ellison and New York Attorney General Letitia James today led a bipartisan coalition of 33 attorneys general in opposing a proposed class action settlement that would permit PHH Mortgage Corporation and its predecessor corporation, Ocwen Loan Servicing, LLC (collectively “PHH”), to continue to profit from often-illegal payment-processing fees that they charge to homeowners.

For years, PHH has been charging more than 17,000 homeowners in Minnesota and close to a million homeowners nationwide, a fee – anywhere from $7.50 to $17.50 each time – solely to make their monthly mortgage payment if that payment is made by phone or through the homeowner’s online account. Nowhere in these homeowners’ mortgage contracts is there authorization for such fees. In fact, PHH does not charge “processing” fees when its customers pay by check or set up automatic debit payments.

But under the terms of the proposed class settlement — a settlement that was hastily entered into only five months after the complaint was filed — PHH would be permitted to continue to charge these fees, up to $19.50 per month, for the remaining life of the loan, which for many Minnesotans could be another 20 to 30 years. In exchange, homeowners will receive a paltry, and for some, illusory, one-time monetary payment. In addition, the proposed settlement seeks to authorize these unlawful fees through an unwritten, mass amendment of the mortgages, a violation of most states’ statutes of frauds, a centuries-old legal doctrine that requires contracts related to property be in writing and signed by the parties.

As if transforming homeowners into a profit center in violation of states’ laws was not enough, the proposed settlement is designed to ensure that a portion of the monetary relief intended for homeowners will actually end up in PHH’s hands. For homeowners whose loans are still serviced by PHH, the only relief will be a credit to their account, with late fees being paid before any credit is applied to the unpaid principal balance of the mortgage. As a result, these credits toward late fees are more of a self-dealing payment to PHH rather than any kind of relief to the homeowner.

Finally, any settlement funds not distributed to the class member homeowners will be returned to PHH. Such a feature in a class-action settlement often suggests to courts that the settlement simply benefits the attorneys involved and is not in the best interest of the impacted class members.

Attorneys General Ellison and the coalition filed an amicus brief in U.S. district court in Florida opposing the proposed settlement in Morris et al. v. PHH Mortgage Corporationet al.

Affording your life is tough enough — and for years, PHH has made it tougher on 17,000 Minnesotans by charging them outlandish, unnecessary, and possibly illegal fees just for the privilege of paying their mortgage. Now, this hastily settled class action lawsuit will allow PHH to continue this harmful practice, in some cases for decades. This doesn’t pass the smell test,” Attorney General Ellison said. “The job of attorneys general is to protect the residents of our states against abuse. I’m proud that more than 30 of us have rallied to stand up for our homeowners and push back on this proposed settlement that benefits the abuser.”

Joining Attorneys General Ellison and James in filing today’s amicus request are the attorneys general of Alaska, Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Maine, Maryland, Massachusetts, Michigan, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, and West Virginia.

 

Edwin Josue Herrera Rosales aka “Josh Herrera,” 34, Washington pleaded guilty today to a conspiracy to defraud approximately 1,000 distressed homeowners facing foreclosure.  Herrera Rosales pleaded guilty to one count of conspiracy to commit wire fraud in connection with his operation of call centers that operated under the names “Sound Solutions Group,” “Community Assistance Center,” and California-based “Sienna Support Network.”

Herrera Rosales and his co-conspirators sent solicitation mailers to distressed homeowners nationwide.  The mailers promised that Herrera Rosales’ organization could reduce homeowners’ mortgage debts and lower their monthly payments.  When homeowners called the call center, operators put the callers through a phony “underwriting” process and then told the callers that the company’s legal and underwriting staff had determined it could negotiate a favorable mortgage modification in exchange for an upfront fee of $3,000.  In fact, the call center had no legal or underwriting staff, and many of the homeowners did not receive the promised modifications.

According to records filed in the case, Herrera Rosales conspired with others based in Southern California to operate the scheme.  Each week the operation sent approximately 4,000 mailers to distressed homeowners across the country.  The mailers stated that that the homeowner had been “pre-approved” for a new government program, under which Herrera Rosales’s organization could negotiate a mortgage modification.  For example, one mailer said that Herrera Rosales’s organization could reduce a borrower’s loan balance by over $140,000 and could reduce the interest rate to 2%.  The mailers urged the homeowners to call the Everett call center for assistance.

Herrera Rosales oversaw a staff of call center operators.  When homeowners contacted the call center, Herrera Rosales directed the operators to follow a script designed to make it appear as if each caller’s mortgage was being reviewed by the company’s “underwriting” and “legal department” to make sure the homeowner qualified for the supposed federal program.  In fact, the call center had no legal staff or underwriting department.  Instead, operators were instructed simply to put each caller on hold for a pre-determined amount of time, to make it appear a review was underway.  The operator then would return to the line and tell each victim that he or she was one of the “very select few” who qualified for the program—but only if the homeowner paid the call center a $3,000 fee.  If the homeowner balked at the fee, the call center staff had another script with certain “hot button” statements to persuade them to sign the documents.  It is impermissible under federal regulations to charge upfront fees for mortgage modification services.

Once the contracts were signed, the call center submitted the homeowner’s paperwork to a California-based loan processing group, which made some minimal efforts to restructure the debt.  While a limited number of customers obtained a lower monthly payment, the vast majority had no change or, in some cases, a higher monthly payment.  The call center used a phony address, and operators used aliases to disguise their identities.

Between March 2016 and May 2018, about 1,000 customers paid over $2.5 million to the various entities operated by Herrera Rosales.  After Herrera Rosales paid the expenses of the call centers and paid a share to his co-conspirators, he kept approximately $360,000.

Herrera Rosales is scheduled for sentencing by U.S. District Judge John C. Coughenour on May 4, 2021.

The announcement was made by U.S. Attorney Brian T. Moran.

The case is being investigated by the FBI.  The case is being prosecuted by Assistant United States Attorney Seth Wilkinson.

herrera_rosales_information.pdf

 

Brian Thomas Twilley, 57, Greenbackville, Virginia, formerly of Salisbury, Maryland, pleaded guilty yesterday to making a false statement on a loan or credit application.

From 2011 through 2015, Brian Twilley served as a member of the Board of Directors for Hebron Savings Bank, located in Wicomico County, Maryland. Twilley also owned a commercial printing business in Wicomico County and was a member of the faculty for the Economics and Finance Department at Salisbury University.

According to his guilty plea, from April 2010 through March 2017, Twilley provided false personal financial statements to Hebron that omitted from his net worth a $200,000 Home Equity Line of Credit (“HELOC”) due to Bank 2 that should have been paid off and closed with the proceeds of a separate HELOC that Twilley had obtained from Hebron. Twilley also provided false personal financial statements to Bank 3.

As detailed in his plea agreement, in August 2006 Hebron issued Twilley a $350,000 HELOC for the purpose of paying off and closing his $200,000 HELOC at Bank 2. As part of Hebron’s approval of the HELOC it required that Bank 2 release their lien on Twilley’s personal residence so that Hebron could secure a first-position lien on this collateral. On August 28, 2006, Twilley signed a letter addressed to Bank 2 directing them to accept the payoff of the loan, close the HELOC account, and forward the release documents to Hebron. The payoff was funded with a Teller’s Check issued by Hebron in the amount of $200,392.04, but the letter directing Bank 2 to close the loan was never delivered and the HELOC account at Bank 2 remained open. Twilley admitted that he continued to make withdrawals of the available funds in Bank 2’s HELOC and by 2010 had withdrawn the full $200,000 available.

As a member of Hebron’s Board of Directors and as a condition of his ongoing loan relationship with Hebron, which included the $350,000 HELOC and multiple commercial loans, Twilley was required to provide Hebron with an annual personal net worth statement. Twilley admitted that from 2010 through 2014 he provided Hebron with his personal financial statement, but failed to disclose the continued existence of the HELOC with Bank 2, which Hebron believed had been closed since 2006.

Further, in December 2014, as part of a request to renew a $100,000 commercial line of credit for his company with Bank 3, Twilley submitted a personal financial statement to Bank 3 that failed to disclose the existence of the HELOC with Bank 2 and the associated debt. When Twilley was questioned by a representative of Bank 3 as to why his credit report reflected a $200,000 HELOC due to Bank 2 that was not listed on his net worth statement, Twilley falsely advised that the HELOC at Bank 2 had been closed when he opened the HELOC at Hebron. The Bank 3 representative informed Twilley that Hebron may want to contact Bank 2 to have them close out the HELOC because Hebron’s secured position in the collateral might be behind Bank 2 if the lien was not released.

Twilley left his position as a member of Hebron’s Board of Directors in 2015. By 2017, Twilley was having difficulty servicing his debts and Hebron attempted to restructure his loan payments. As part of the negotiations, on March 17, 2017, Twilley again sent a personal financial statement to Hebron that failed to disclose the existence of his debt due on the HELOC with Bank 2, which then had a balance of approximately $176,000, thereby underreporting Twilley’s outstanding obligations. When a representative subsequently suggested that the collateral for the Hebron HELOC be sold, they learned that Bank 2 still held a first-position lien on the property because the HELOC with Bank 2 had never been closed. In July 2018 Twilley declared bankruptcy and Hebron restructured all of Twilley’s personal and commercial debts. In November 2018, the collateral for the HELOC was sold and $163,081.88 of the proceeds was disbursed to Bank 2 as a lien holder in first position, depriving Hebron of the proceeds of the sale.

As part of his plea agreement, Twilley will be required to pay restitution of $163,081.88, the full amount of the victim’s loss.

Twilley faces a maximum sentence of 30 years in federal prison for making a false statement on a loan or credit application. Actual sentences for federal crimes are typically less than the maximum penalties and are determined by a federal district court judge after taking into account the U.S. Sentencing Guidelines and other statutory factors. U.S. District Judge Stephanie A. Gallagher has not yet scheduled a sentencing date for Twilley.

The guilty plea was announced by United States Attorney for the District of Maryland Robert K.

Hur; Special Agent in Charge Robert W. Manchak of the Federal Housing Finance Agency, Office of Inspector General (FHFA OIG); and Special Agent in Charge Shimon R. Richmond of the Federal Deposit Insurance Corporation, Office of Inspector General (FDIC OIG).

United States Attorney Robert K. Hur commended the FHFA OIG and FDIC OIG for their work in the investigation. Mr. Hur thanked Assistant U.S. Attorney Sean R. Delaney, who is prosecuting the case.

Brian Roy Lozito, 51, Orange Park, Florida has been charged with conspiracy to commit wire fraud and 12 counts of wire fraud.

According to the indictment, Lozito owned and managed American Investigative Services (AIS). AIS purported to offer consumers mortgage auditing services in exchange for a fee. Lozito and his conspirators solicited customers nationwide through mailings and telephone calls. In these solicitations, Lozito and AIS employees under his direction made false and fraudulent representations to consumers, including that AIS would perform “forensic audits” of mortgage documents in order to uncover evidence of deficiencies in the mortgage documents. Lozito claimed AIS would obtain quitclaim deeds and other remedies, so the mortgage holders would be relieved of their mortgage debt and own their properties free and clear. If AIS could not help the consumer, Lozito promised to refund their money. In reality, AIS did not perform the services paid for by consumers and did not refund money to consumers. Money collected from consumers went to bank accounts controlled by Lozito, and he spent the money.

An indictment is merely a formal charge that a defendant has committed one or more violations of federal criminal law, and every defendant is presumed innocent unless, and until, proven guilty.

If convicted, Lozito faces a maximum penalty of 20 years in federal prison on each count and payment of restitution to the victims he defrauded. Lozito was arraigned on the charges on January 11, 2021. His trial is set for March 1, 2021.

United States Attorney Maria Chapa Lopez made the announcement.

This case was investigated by the U.S. Secret Service (Jacksonville Field Office) and the Office of the Florida Attorney General – Consumer Protection Division, with assistance from the Clay County Sheriff’s Office. It will be prosecuted by Assistant United States Attorney Kevin C. Frein.

 

Neal J. Vanderpoel II and Eileen P. Vanderpoel, Medford, New Jersey and their sons Ryan Vanderpoel, Medford, New Jersey and Neal J. Vanderpoel IV, Magnolia, New Jersey, as announced today, have been charged in a lawsuit to halt a scheme in which they operated multiple companies to defraud struggling homeowners by offering them mortgage adjustment services that provided no meaningful relief and often made their precarious financial situation even worse.

The State’s complaint alleges that the Vanderpoels’ advertised, offered for sale, and performed fraudulent or worthless loan modification and other debt adjustment services to New Jersey consumers through a web of corporate entities. The corporate entities include Financial Services for America; Financial Processing Services, LLC; Tri-State Financial Relief, LLC; and Mortgage Help and Loan Audits of America, LLC, which are also named as Defendants.

Through their corporate entities, most of which were not authorized to provide debt adjustment services in New Jersey, the Vanderpoels charged consumers up-front rates grossly in excess of the legal limits for permissible charges by licensed debt adjusters, netting them well over a million dollars in profits, the suit alleges.

After filling financially distressed consumers with false hope of guaranteed loan modifications, the Defendants failed to deliver, often causing consumers to fall further behind on their mortgage payments and making the threat of foreclosure more imminent, the suit alleges.

The State’s 18-count complaint alleges that the Defendants grossly exceeded the $25.00 fee cap imposed by the New Jersey’s Debt Adjustment and Credit Counseling Act by charging at least 556 New Jersey consumers $3,200 or more to prepare a “Forensic Audit Report,” which would purportedly assist consumers in their mortgage modifications.

The complaint also alleges that Defendants violated the New Jersey Consumer Fraud Act, advertising regulations, and the Nonprofit Corporations Act.

According to the complaint, the Defendants rarely if ever reviewed the consumers’ underlying notes or mortgage instruments and were not qualified to render opinions as to the legality of a consumer’s mortgage. The “Forensic Audit Report,” which Defendants generated using third-party compliance software, did not in fact assist consumers with their mortgage modifications, as promised by Defendants, and was largely worthless, the complaint alleges.

As a result of Defendants’ unconscionable and unlawful practices, consumers often forfeited all monies paid to Defendants, were forced to spend additional time and money to try to remain in their homes, were forced to file for bankruptcy, ended up losing their homes in foreclosure, and/or were forced to modify their loans on less favorable terms, the complaint alleges.

Today, the State also obtained a court order temporarily restraining Defendants from providing any loan modification or debt adjustment services, preventing Defendants from conducting business under unregistered assumed names, freezing all assets of Financial Services of America and the other corporate entities, and prohibiting Defendants from disposing of any assets derived from their purported mortgage modification businesses, among other relief.

The current action is brought against not only the current entities, but also against the family members individually. The State sought and secured temporary restraints in part to prevent the Vanderpoels and their companies from seeking to evade accountability as they had in the past.

Attorney General Gurbir S. Grewal and Department of Banking and Insurance (DOBI) Commissioner Marlene Caride made the announcement today.

We have zero tolerance for predatory practices targeting vulnerable consumers who want nothing more than to stay in their homes, especially in the midst of a pandemic,” said Attorney General Grewal. “And by partnering with the Department of Banking and Insurance, as we are today, we are sending a message that we won’t hesitate to bring the full range of the State’s consumer financial protection laws to bear when we crack down on unconscionable consumer abuses.”

Today was an important step in ending the deceitful practices perpetrated by these individuals and preventing other homeowners from falling victim to this scheme. These defendants took advantage of people already struggling financially and made their situations worse. The fact that they targeted our residents during a time when people are especially vulnerable makes their actions that much more reprehensible. With this action we are sending a message that those who engage in predatory and abusive practices will be held accountable,” said Commissioner Caride.

Today’s lawsuit reflects the Division of Consumer Affairs’ increased focus during the Murphy Administration on unconscionable practices in the markets for consumer financial products and services.

Those protections are especially important as the COVID-19 emergency enters its eleventh month. And the State’s complaint alleges that the Vanderpoels sought to capitalize on consumers’ financial insecurity by misleadingly suggesting that one of their companies offers services designed to address hardships caused by the COVID-19 pandemic.

For most homeowners, the prospect of losing their homes is a time of stress and fear. In this lawsuit, we allege that these defendants callously preyed on that vulnerability,” said Paul R. Rodríguez, Director of the Division of Consumer Affairs. “Instead of helping homeowners out of a financial crisis, as they promised, defendants made it worse by causing people to fall further into debt as they paid for undelivered services with money that could have been applied to their mortgages.”

For the Division of Consumer Affairs, Deputy Attorney Donna J. Dorgan, Assistant Section Chief John Regina and Section Chief Patricia Schiripo of the Consumer Fraud Prosecution Section in the Division of Law’s Affirmative Civil Enforcement Practice Group and Assistant Attorney General Jeremy Hollander of the Affirmative Civil Enforcement Practice Group are handling the matter, with assistance from attorney Andrew Esoldi.  Investigator Brian Penn and Loretta Creggett and Supervising Investigator Jennifer Micco of the Office of Consumer Protection are handling the investigation for the Division

For the Department of Banking and Insurance, the matter is being handled by Deputy Attorney General Garen Gazaryan, Assistant Section Chief Nicholas Kant, Section Chief Richard E. Wegryn, Jr., and Assistant Attorney General Raymond R. Chance, III, in the Division of Law’s Financial Affairs Practice Group.

Consumers who believe they have been cheated or scammed by a business, or suspect any other form of consumer abuse can file an online complaint with the State Division of Consumer Affairs by visiting its website or calling 1-800-242-5846 to receive a complaint form by mail.

Consumers who have any issue or complaint concerning any entity regulated by the Department of Banking and Insurance, can contact the Department’s Consumer Hotline at 1-800-446-7467 or go to the Department website and click on Consumer Assistance – Inquiries/Complaints, at https://www.dobi.nj.gov

The mission of the Division of Consumer Affairs, within the Department of Law and Public Safety, is to protect the public from fraud, deceit, misrepresentation and professional misconduct in the sale of goods and services in New Jersey through education, advocacy, regulation and enforcement. The Division pursues its mission through its 51 professional and occupational boards that oversee 720,000 licensees in the state, its Regulated Business section that oversees 60,000 NJ registered businesses, as well as through its Office of Consumer Protection, Bureau of Securities, Charities Registration section, Office of Weights and Measures, and Legalized Games of Chance section.

 

Iskyo Aronov (also known as “Isaac Aronov”) Middle Village, New York, Ron Borovinsky, Hollis Hills, New York and Michael Konstantinovskiy, Roslyn Heights, New York have been charged in a wide-ranging mortgage fraud scheme to defraud the government.

In a complaint unsealed today, Aronov, Borovinsky, Konstantinovskiy, and companies that they owned or controlled (175 Vernon Ave. Inc., 308 Linde St. LLC, 725 Management LLC, 1021 B Holdings LLC, 1083 Lafayette Ave. LLC, 1178 Gates Ave. Inc., 2320 Baeumont Ave Unit 3d LLC, 1S8C Holdings LLC , Ag2 Equities, Inc., Arbie Management Inc., Bedstuy Group LLC, Bert Holdings LLC, BNE Management LLC, Etuy Equities LLC, IA Investors LLC, IJ Development LLC, LL Fund Inc., LL Organization Inc., MI 1 Holdings LLC, MIP Management Inc., My Ideal Property Group LLC, My Ideal Property Rockaway Blvd. LLC, National Homeowners Assistance Inc., Phase 2 Development LLC, Pim Equities Inc., Settle NY Corp, ZOR Equities LLC, ZT Equities LLC), have been charged in engaging in a fraudulent short sales of residential properties insured by the Federal Housing Administration (FHA) of the United States Department of Housing and Urban Development (HUD).

Pursuant to HUD’s Pre-Foreclosure Sale Program, qualifying homeowners with defaulted, FHA-insured mortgages may sell their properties in a “short sale” for less than the balance of the mortgage if the sale is for the fair market value of the property.  If a homeowner obtains approval for a short sale, the lender releases the mortgage after the short sale and submits an FHA insurance claim to HUD to cover the outstanding mortgage balance net of the short sale proceeds, plus approved costs and interest.  HUD, in turn, pays the lender’s claim from federal funds.

Aronov was the founder, Chief Executive Officer and President of defendants My Ideal Property Inc., My Ideal Property Group LLC and MIP Management Inc., and also controlled other affiliated corporate entities that he allegedly established to help him fraudulently acquire residential properties.  Borovinsky identified himself as a co-founder with Aronov of My Ideal Property.  Konstantinovskiy worked as an agent for My Ideal Property where he allegedly conspired with others to fraudulently obtain properties.

As alleged in the complaint, from at least 2013 through 2016, the defendants defrauded HUD by manipulating the short sale process to acquire residential properties from numerous distressed homeowners for below-fair market value prices in non-arm’s-length transactions.  The individual defendants used various corporate entities in furtherance of the fraudulent scheme.  In the process, defendants made a host of material misrepresentations in critical transaction documents.  As a result, defendants not only acquired the properties for below-fair market value prices, but obtained broker fees in the transactions and induced lenders to release the FHA-insured mortgages at a loss.  In turn, HUD paid the lenders’ claims for FHA insurance from federal funds.  These payments by HUD were artificially inflated as a result of the defendants’ fraudulent conduct.

Seth D. DuCharme, Acting United States Attorney for the Eastern District of New York, Christina Scaringi, Special Agent-in-Charge, U.S. Department of Housing and Urban Development, Office of the Inspector General, Northeast Region (HUD-OIG), and Robert Manchak, Special Agent-in-Charge, Federal Housing Finance Agency, Office of Inspector General, Northeast Region (FHFA-OIG), announced the filing.

As alleged, these defendants fraudulently obtained homes at depressed prices at the expense of a taxpayer-funded program designed to assist borrowers seeking the American Dream of home ownership,” stated Acting U.S. Attorney Seth DuCharme.  “This Office is committed to protecting the integrity of the FHA insurance program from those who try to enrich themselves through predatory mortgage fraud schemes.

The defendants allegedly engaged in a scheme of wholesale deception when they provided false, misleading, and incomplete information to lending institutions, homeowners, and the Federal Housing Administration (FHA) causing millions of dollars in damages to the FHA, which typically results in higher premiums being charged to future first-time homeowners.  In addition, the artificial devaluation of residential properties will slow the recovery of market values at a time of economic challenge when affordable housing is at a premium,” stated HUD-OIG Special Agent-in-Charge Scaringi.

The Federal Housing Finance Agency, Office of Inspector General (FHFA-OIG) is committed to holding accountable those who waste, steal, or abuse the resources of the Government-Sponsored Enterprises regulated by FHFA.  We are proud to have partnered with the U.S. Attorney’s Office for the Eastern District of New York in this case,” stated FHFA-OIG Special Agent-in-Charge Manchak.

The suit is brought pursuant to the False Claims Act (FCA) and the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).

The government’s complaint intervenes in a lawsuit originally brought by under the qui tam provisions of the FCA.  Under the FCA, private citizens with knowledge of fraud against the government can bring a lawsuit on behalf of the United States and share in the recovery.  The act also permits the government to intervene in such actions, as the government has done in this case.  The government’s case is being handled by Assistant United States Attorney Michael J. Castiglione, with assistance from Affirmative Civil Enforcement Auditor Michael Gambrell.

 

Daniel R. Fruits, 46, Greenwood, Indiana, was charged today by a federal grand jury for his alleged role in three separate fraud schemes, including attempted mortgage fraud , a nearly $14 million fraud on an investor, and a vehicle title-washing scheme.

The Indictment alleges Fruits attempted to perpetrate a mortgage fraud scheme on Fifth Third Bank. Specifically, in late 2018, Fruits made false statements to Fifth Third Bank to secure a $432,000 mortgage. He twice submitted falsified paperwork purporting to show that loans from another bank had been paid off, when they had not been.

The Indictment also alleges that Fruits defrauded a Kentucky investor, who was also Fruits employer, out of nearly $14 million. In 2015, the investor founded a trucking company, Secure Transit, and hired Fruits to run it. Over the next four-and-a-half years, the investor would invest approximately $14 million in the business.

Fruits repeatedly lied about the company’s financial health, who its customers were, and what the money invested was being used for. On multiple occasions, Fruits allegedly sent the investor fictitious customer sales contracts and falsified financial statements that reported inflated company profits. At the same time, Fruits allegedly asked the investor for additional investments, sometimes in the millions of dollars, purportedly for the purchase of trucks or other business expenses.

Fruits spent a significant portion of the money on his own personal purchases and payments. He allegedly spent approximately $880,000 to purchase a horse farm and his personal residence, $560,000 on an RV and trailer, over $111,000 on a Corvette, approximately $90,000 on three Rolex watches, approximately $55,000 on a horse, $33,000 on a horse trailer, $23,000 on payments for two Ferraris, and $30,000 on payments for two escorts.

Finally, Fruits perpetrated a title-washing scheme to remove a bank’s lien from the title of a truck he purchased. He financed the truck with a loan from Ally Financial for over $69,000.  Several months later, he sent the Indiana Bureau of Motor Vehicles a falsified letter purportedly from Ally Financial stating that the loan had been paid off and the lien should be released.

The loan had not been paid off and Ally Financial never wrote that letter. As a result, the BMV issued Fruits a free-and-clear title for the truck, which Fruits then sold for $48,000, without repaying the loan to Ally Financial.

Acting United States Attorney John E. Childress made the announcement.

This financial investor gave his hard-earned money to someone whom he thought he could trust,” said Childress. “Instead, the victim’s money ended up in the hands of a self-absorbed thief who only cared about his interests. Living a life of fraud is inexcusable and always comes to an end.

This case was the result of an investigation by the Federal Bureau of Investigations, and Internal Revenue Service Criminal Investigation.

This indictment sends a strong message that the FBI will aggressively investigate those who commit such extensive financial fraud and steal from their employer to pad their own pockets to fund a lavish lifestyle,” said FBI Indianapolis Special Agent in Charge Paul Keenan. “The FBI and our law enforcement partners will always pursue those who take advantage of others through illegal and criminal behavior.

The IRS enforces the nation’s tax laws, but also takes particular interest in cases where someone, for their own personal benefit and greed, has taken what belongs to others,” said Acting Special Agent in Charge Tamera Cantu, of IRS Criminal Investigation, Chicago Field Office. “With our agent’s financial investigation expertise, we followed the money and helped to unravel the fraud and deceit conducted by Mr. Fruits. We are pleased with the successful resolution of this investigation due to the cooperative efforts of our law enforcement partner and the U.S. Attorney’s office in the Southern District of Indiana.”

An indictment is a set of allegations and is not itself evidence of guilt. A defendant is presumed innocent and is entitled to a fair trial at which the government must prove guilt beyond a reasonable doubt.

In November of 2020, Acting United States Attorney John E. Childress renewed a Strategic Plan designed to shape and strengthen the District’s response to its most significant public safety challenges. This prosecution demonstrates the Office’s firm commitment to prosecuting complex, long-running fraud schemes. (See United States Attorney’s Office, Southern District of Indiana Strategic Plan 5.1)

 

Nationstar Mortgage, the country’s fourth-largest mortgage servicer, has agreed to resolve parallel investigations by state attorneys general, state mortgage regulators, and the federal Consumer Financial Protection Bureau in a settlement that includes combined monetary relief valued at around $86.3 million.

The settlement resolves allegations that Dallas-based Nationstar, which does business as “Mr. Cooper,” violated consumer protection and banking laws in its servicing of residential mortgage loans. The New Jersey Department of Banking and Insurance is among the state mortgage regulators involved in the settlement.

The settlement provides for restitution to over 55,000 borrowers across the U.S. who suffered foreclosure and other harms due to a variety of mortgage loan servicing violations by Nationstar.

In New Jersey, the settlement affects 2,075 borrowers, and has a total value to those borrowers of approximately $3.45 million.

A complaint and consent judgment memorializing the settlement were filed today in the U.S. District Court for the District of Columbia by the participating attorneys general.

The consent judgment addresses conduct by Nationstar spanning the period from January 1, 2011 through December 31, 2017.

The complaint alleges a wide variety of unlawful acts and practices by Nationstar during those years, including:

  • failing to properly oversee and implement the transfer of mortgage loans;
  • failing to appropriately identify loans with pending loan modification applications when a loan was being transferred to Nationstar for servicing;
  • failing to timely and accurately apply payments made by certain borrowers;
  • threatening foreclosure and conveying conflicting messages to certain borrowers engaged in loss mitigation;
  • failing to properly process borrowers’ applications for loan modifications;
  • failing to properly review and respond to borrower complaints;
  • failing to make timely escrow disbursements, including the failure to timely remit property tax payments;
  • failing to timely terminate borrowers’ private mortgage insurance; and
  • collecting monthly modified payment amounts on certain loans where the amounts charged for principal and interest exceeded the principal and interest amount contained in the trial plan agreement.

In addition to providing for monetary relief for eligible borrowers, today’s settlement requires Nationstar to follow a detailed set of rules or “servicing standards” for its handling of certain mortgage loans going forward. These standards are more comprehensive than existing law, and take effect for three years starting January 1, 2021.

Among other things, the servicing standards require Nationstar to: ensure the accuracy of information it includes in foreclosure-related filings; apply any borrower payments that exceed the amount due in accordance with the borrower’s instructions; adopt more consumer-accessible procedures for handling billing disputes, such as a toll-free number and  email; and take prompt action to remediate inaccuracies in borrowers’ account information – including correcting information provided to credit reporting agencies, and providing refunds or account credits where appropriate.

The servicing standards also require Nationstar to offer loan modifications for eligible borrowers rather than initiate foreclosure when such loan modifications meet program and other requirements, and to periodically have the company’s primary system for recording account information independently reviewed for accuracy and completeness.

Attorney General Gurbir S. Grewal made the announcement today.

This settlement illustrates the benefits of state and federal partnership when it comes to consumer financial protection,” said Attorney General Grewal. “By working together, we were able to provide more relief for homeowners in New Jersey and around the country. And with many homeowners struggling to pay their mortgages in today’s economy, we’re sending a clear message that we’re here for them.

Homeownership is one of the most important investments our residents can make, and the Department is committed to ensuring that all New Jersey homeowners are treated fairly when seeking help from their mortgage servicer,” said Department of Banking and Insurance Commissioner Marlene Caride. “New Jersey worked in collaboration with state and federal partners on this case to reach a resolution which provides compensation for our residents and specific servicing requirements for Nationstar that enhance consumer protections.”

In addition to the Consumer Financial Protection Bureau and the state mortgage regulators, which filed separate settlement agreements, the settlement was signed by the attorneys general for all 50 states and the District of Columbia. The partners also collaborated with the U.S. Trustee Program, a component within the Department of Justice that seeks to promote the efficiency and protect the integrity of the bankruptcy system. The USTP is finalizing a separate agreement with Nationstar to address historical servicing issues impacting borrowers in bankruptcy.

This settlement not only provides over $3 million in financial relief for borrowers in our state, but also raises the bar in the mortgage market,” said Division of Consumer Affairs Acting Director Paul R. Rodríguez. “By requiring that businesses adhere to higher standards of care for their clients, we are ensuring that our residents are protected from sloppy practices that cause real damage to their financial wellbeing and our economy.”

In 2012, Nationstar began purchasing mortgage servicing portfolios from competitors and grew quickly into the nation’s largest non-bank servicer. As loan data was transferred to Nationstar, borrowers who had sought assistance with payments and loan modifications sometimes fell through the cracks, the lawsuit alleged. Borrowers in this category will receive a guaranteed minimum payment of $840 as part of the settlement.

Other borrowers suffered damages when Nationstar failed to oversee third-party vendors hired to inspect and maintain properties owned by delinquent borrowers and improperly changed locks on their homes, the lawsuit alleged. These borrowers will receive a guaranteed minimum payment of $250.

A settlement administrator, Rust Consulting, will send a claim form to eligible borrowers in 2021. Nationstar has already provided some of the relief outlined in the settlement.

The agreement also requires Nationstar to conduct audits and provide audit results to a committee of states to ensure compliance with the settlement.

Deputy Attorney General Donna J. Dorgan of the Consumer Fraud Prosecution Section in the Division of Law’s Affirmative Civil Enforcement Practice Group represented the State in the Nationstar matter.

 

Dennys A. Tapia, 54, Ridgefield Park, New Jersey, admitted today, his role in a scheme to defraud financial institutions of hundreds of thousands of dollars

According to documents filed in this case and statements made in court: From 2015 to 2018, Tapia conspired with others to fraudulently obtain mortgage loans from financial institutions, including “Mortgage Lender A” and “Mortgage Lender B,” to finance the purchase of properties by unqualified buyers. Applicants for mortgage loans are required to list their assets and income on their mortgage loan applications, and mortgage lenders rely on those applications when deciding whether to issue mortgage loans.

Tapia admitted to participating in a conspiracy in which he knowingly provided fraudulent documents to a loan officer at Mortgage Lender A for potential borrowers, including fraudulent lease agreements, bank statements, and a gift check and gift letter. Based on this false information, Mortgage Lender A issued mortgage loans to unqualified buyers, which caused Mortgage Lender A hundreds of thousands of dollars in losses. Tapia also admitted to conspiring with a straw borrower, “Individual A,” to submit an application to Mortgage Lender B for a cash-out refinance mortgage loan that contained multiple misrepresentations of material facts and fraudulent documents, including pay stubs and a verification of employment. Based on the false information submitted by Individual A and Tapia, Mortgage Lender B issued a false and fraudulent cash-out refinance mortgage loan, which resulted in Tapia earnings tens of thousands of dollars in profits.

The conspiracy charge to which Tapia pleaded guilty carries a maximum of 30 years in prison and a $1 million fine. Sentencing is scheduled for April 17, 2021.

Tapia pleaded guilty by videoconference before U.S. District Judge Stanley R. Chesler to an information charging him with one count of conspiracy to commit bank fraud.

U.S. Attorney Craig Carpenito made the announcement.

U.S. Attorney Carpenito credited special agents of the FBI, under the direction of Special Agent in Charge George M. Crouch Jr. in Newark, and special agents of the Federal Housing Finance Agency, Office of Inspector General, under the direction of Special Agent in Charge Robert Manchak, with the investigation leading to today’s guilty plea.

The government is represented by Assistant U.S. Attorney Jonathan Fayer of the Economic Crimes Unit of the U.S. Attorney’s Office, and Special Assistant U.S. Attorney Charlie Divine of the Federal Housing Finance Agency, Office of Inspector General.