Tuesday, August 19, 2008

4 Charged In New Jersey Mortgage Fraud & Property-Flipping Scheme

Four members of a mortgage fraud and property-flipping scheme involving rental properties in Paterson were named in a 25-count Indictment unsealed following the arrest of one of the suspects and the surrender of another. The Indictment alleges that Gerald Carti, 61, Oakland, New Jersey; Renford Davis, 37, Patterson, New Jersey; Amer Mir, 39, Jersey City, New Jersey, and Frederick Ugwu, 51, Saddle River, New Jersey, conspired with others to obtain millions of dollars of mortgage loans for unqualified borrowers during 2002 through 2005 to purchase two- and three-family homes in Paterson, New Jersey for inflated prices. The Indictment further alleges that when problems arose with the mortgage loans, the conspirators paid them off with new fraudulent mortgage loans.

The Indictment was returned by a grand jury in Newark and was unsealed following the arrest of Carti. Ugwu surrendered to the FBI in Newark. Mir and Davis are subjects of arrest warrants and are being sought. Carti and Ugwu made initial appearances before U.S. Magistrate Judge Patty Shwartz, who set bail at $1million for both men.

The Indictment is the latest step in an investigation by the U.S. Department of Housing and Urban Development, Office of Inspector General (HUD-OIG) the FBI, the U.S. Postal Inspection Service and the Internal Revenue Service Criminal Investigations Division into fraudulent Federal Housing Administration-insured and conventional mortgage loans originated by various New Jersey mortgage companies, including Pine Brook, New Jersey based US Mortgage Corp., where Carti worked and was a shareholder, and Jersey City-based United Home Mortgage Co., where Mir worked.

The investigation has resulted in more than 10 guilty pleas from New Jersey residents, including:

Maurice Bethea, a developer;

David Cobianchi, a former US Mortgage loan officer;

Frank Corallo, a former US Mortgage loan processor;

Michael Eliasof, a real estate agent;

Melanie Gebbia, a former paralegal for a closing attorney;

Claribel Morrobel, who worked with Eliasof;

William Ottaviano, an appraiser; and

Mara, Maristane and Norma Silva, real estate agents.

According to the Indictment, Ugwu and others obtained Paterson, New Jersey properties cheaply, knowing that Eliasof would find borrowers to purchase the properties at inflated prices. The borrowers were told that the properties would be good investments and that they would: (a) neither pay deposits and closing costs to acquire the properties, nor make monthly mortgage payments after they owned the properties; (b) receive monthly cash payments and a percentage of future sales profits when the conspirators sold the properties; and (c) not have to manage the properties because Eliasof would maintain them, locate tenants, collect rent and make mortgage payments.

According to the Indictment, Ugwu and others caused basic or cosmetic repairs to be made to the properties, so that the homes would appear habitable to appraisers and prospective tenants. Meanwhile, Carti and others allegedly caused US Mortgage to originate, underwrite and fund mortgage loans to the borrowers, knowing that they were not financially qualified and that US Mortgage would sell or attempt to sell the loans on the secondary market to Residential Funding Corporation (RFC) and other investors. Carti received substantial commissions for these mortgage loans.

According to the Indictment, in completing the borrowers’ loan applications, Carti and others attributed to them inflated incomes, false bank account balances, fake sales contract deposits and fictitious assets. Carti and Eliasof also allegedly instructed Ottaviano and other appraisers to generate inflated appraisals for the properties. Ottaviano, who was not a licensed appraiser, completed the appraisals by forging the signature of an unwitting licensed New Jersey real estate appraiser to attest as a supervisory appraiser to the accuracy of the reports.

According to the Indictment, the borrowers attended closings at a Garfield law office where Gebbia worked. There, at the closing attorney’s direction, Gebbia prepared fraudulent HUD-1 Uniform Settlement Statements that were signed by the borrowers, Ugwu and others reflecting deposits that had never been made. The closing attorney then allegedly distributed proceeds of the fraudulently-obtained mortgage loans to the conspirators by checks made payable to companies controlled by Eliasof, who in turn paid kickbacks to Carti, the closing attorney and others.

According to the Indictment, in or about June 2003, RFC began notifying US Mortgage of irregularities concerning some of the fraudulent mortgage loans. Meanwhile, some of fraudulent mortgage loans fell into default. To prevent US Mortgage from losing millions of dollars in connection with these fraudulent loans and to convince RFC not to terminate a line of credit it had extended US Mortgage, a senior US Mortgage officer directed Carti, the closing attorney and Eliasof to pay off the existing loans by refinancing them through new mortgage loans for the existing unqualified borrowers or by reselling the properties secured by those loans to new, similarly unqualified borrowers.

According to the Indictment, to accomplish this, Carti, the closing attorney and Eliasof directed Davis, Mir, Corallo and others to find new borrowers and obtain new mortgage loans through US Mortgage, United Home and another mortgage company. When refinancing the fraudulent loans or reselling the properties, the conspirators used even higher inflated appraisals and prices. In addition, to enhance the creditworthiness of the borrowers seeking new mortgage loans, Davis, Corallo and others generated false verifications of employment, rent and income and other false documents. Carti and Mir received substantial commissions for these new mortgage loans; they also received kickbacks from Eliasof, who paid other kickbacks, as well.

The Indictment charges Carti, Davis, Mir and Ugwu with one count of conspiracy to commit wire fraud. The Indictment also charges Carti, Davis and Mir with one count of conspiracy to commit money laundering; ten counts, six counts and six counts, respectively, of wire fraud; and three counts, six counts and four counts, respectively, of money laundering involving monetary transactions exceeding $10,000. Despite the Indictment, however, all four defendants are presumed innocent unless and until proved guilty beyond a reasonable doubt.

U.S. Attorney Christopher J. Christie credited Special Agents of HUD-OIG, under the direction of Special Agent in Charge Rene Febles, Special Agents of the FBI, under the direction of Special Agent in

Charge Weysan Dun, Postal Inspectors of the U.S. Postal Inspection Service, under the direction of Postal Inspector In Charge David L. Collins, and Special Agents of the IRS Criminal Investigation Division, under the direction of Special Agent in Charge William P. Offord, for their tireless investigation leading to the Indictment.

The government is represented by Assistant U.S. Attorney Mark E. Coyne of the U.S. Attorney’s Commercial Crimes Unit.

mortgage fraud

1. The matters described in this article were referred to law enforcement by US Mortgage Corp., one in 1999, and the others in 2004, except for the RFC matter which was the subject of a SARS report filed with US Mortgage’s knowledge and cooperation in 2003.  All of the former employees of the company who have pled guilty were terminated by US Mortgage as far back as September 2000 after a company investigation.  We have cooperated with the government in these matters for several years and will continue to do so in an effort to support their efforts to identify and punish those who commit mortgage fraud, a sentiment we have long supported, both privately through stringent internal QC policies, and publicly thorugh our voluntary interaction with law enforcement.  US Mortgage Corp. has a zero-tolerance fraud policy, and has not been identified as a subject or target of this investigation.

   Posted by  on  08/20  at  05:00 AM

2. This post corrects one item of information in the previous comment.  The US Attorney’s office has not named US Mortgage as a target in this investigation, although the company is technically a subject while the investigation remains pending. US Mortgage reaffirms its commitment to fully cooperate with the government in all aspects of its investigation, and is confident that at the conclusion of the investigation, the company’s status will not change. The posting error was unintentional.

   Posted by  on  08/21  at  07:22 AM

3. I worked at US Mortgage in 1999 and 2000 and I can absolutely tell you that there was a lot of fraud going on, management knew about it and was complicit in it.  If you questioned a document in a loan/said that you felt somethimg wasn’t legit, you were ridiculed, told that you were wrong, and made to feel like your job was on the line.  I am glad that I got out of there.  To answer Sasha’s post, yes William Ottaviano is the son of June Ottaviano.

   Posted by  on  01/29  at  03:16 PM

4. Interesting, Andrew Liput was not at US mortgage Until 4.5 years ago and Jerseyboy is implicating him in something that occured way prior to his arrival.

   Get your dates staright therwe JERESY BOOOY

   Posted by  on  02/12  at  02:52 PM

5. CU National Mortgage Court Docs Reveal Fraud 3/3/2009
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   Court documents reveal details about alleged fraud committed by Pine Brook, N.J.-based U.S. Mortgage Corp. and its kaput credit union division, CU National Mortgage.
   The $247 million Picatinny Federal Credit Union of Dover, N.J. was revealed to be the holdout credit union mentioned in a Feb. 26 press release announcing U.S. Mortgage’s bankruptcy filing when it filed objection documents that detail alleged fraud.
   Picatinny accused U.S. Mortgage of selling 58 of its mortgages, worth $14 million, to Fannie Mae without its knowledge or approval. Upon learning of the fraud, Picatinny asked for its loan files back; U.S. Mortgage refused. The credit union filed an order of restraint against U.S. Mortgage, but before the order could be heard, the mortgage company filed bankruptcy.
   Washington-based attorney Bruce Jolly, who has been working as a liaison between U.S. Mortgage and affected credit unions, said mortgage ownership disputes could result in litigation, but he’s hopeful the parties involved will reach a conclusion themselves.
   “I am very much in the credit unions’ camp on this,” Jolly said. “We need a resolution. My greatest concern is that these loans will remain in limbo for an unreasonable period of time.”
   Court documents reveal details about alleged fraud committed by Pine Brook, N.J.-based U.S. Mortgage Corp. and its kaput credit union division, CU National Mortgage.
   The $247 million Picatinny Federal Credit Union of Dover, N.J. was revealed to be the holdout credit union mentioned in a Feb. 26 press release announcing U.S. Mortgage’s bankruptcy filing when it filed objection documents that detail alleged fraud.
   Picatinny accused U.S. Mortgage of selling 58 of its mortgages, worth $14 million, to Fannie Mae without its knowledge or approval. Upon learning of the fraud, Picatinny asked for its loan files back; U.S. Mortgage refused. The credit union filed an order of restraint against U.S. Mortgage, but before the order could be heard, the mortgage company filed bankruptcy.
   Washington-based attorney Bruce Jolly, who has been working as a liaison between U.S. Mortgage and affected credit unions, said mortgage ownership disputes could result in litigation, but he’s hopeful the parties involved will reach a conclusion themselves.
   “I am very much in the credit unions’ camp on this,” Jolly said. “We need a resolution. My greatest concern is that these loans will remain in limbo for an unreasonable period of time.”

   Posted by  on  03/11  at  02:29 PM