Wednesday, October 03, 2007

Trustee Sues New Jersey Mortgage Company

Charles M. Forman, the appointed chapter 7 trustee for NJ Affordable Homes Corp., filed a Complaint against First United Mortgage and its president and CEO, Joseph Natale, in Federal Bankruptcy Court.

According to the complaint, Wayne Puff served as NJ Affordable‘s President.  Puff used NJ Affordable and others to defraud hundreds of people out of tens of millions of dollars.  Puff intentionally relied on fraudulent and materially misleading property appraisals to induce investors to invest funds with NJ Affordable in return for mortgages that far exceeded the actual value of the mortgaged properties.  Puff offered rates of return to investors that far exceeded rates otherwise available in the relevant market place.

Also as part of the scheme, Puff used employees, NJ Affordable’s investors, or others, as straw buyers to continue to acquire properties from NJ Affordable, its affiliates, or other investors at no cost to themselves, and to obtain tens of millions of dollars from loans provided by third-party financial institutions.

The Defendants First United and Natale, assisted Puff or NJ Affordable in many of these transactions by processing mortgage loan applications and issuing or granting mortgages which were then sold and assigned to one or more banks such as, and not limited to Washington Mutual Bank, Countrywide Lending, Credit Suisse First Boston and others, usually on the same day that the notes and mortgages were signed.

Allegedly, the Defendants’ ability to process and issue (or grant) and sell the aforesaid mortgages was greatly facilitated by the Defendants’ repeated failures to honor or abide by the standards of conduct (whether contractual, or pursuant to mortgage lending/direct underwriting guidelines) applicable to First United and its employees, and by their repeated breaches of the representations and warranties First United made to banks, government agencies, and others as an approved Direct Underwriting mortgage loan broker/seller.

Some examples included in the complaint of the overvalued properties are as follows:

UpperLake f/k/a 14 Municipal, Wantage, is vacant land.
Purchase price in February 2004: $7,500.
Appraised value: $750,000
NJ Affordable still holds the property, it remains vacant
and zoning
regulations prohibit building on it.

5 Borman Ave., Woodbridge, is vacant land.
Purchase price in 1999: $60,000.
Appraised value: $2,085,000.
NJ Affordable still holds the property and it remains
vacant.

58 Race Street, North Plainfield.
Purchase price in 1999: $85,000.
Appraised value: $3,900,000.
NJ Affordable still holds this property.
43251/0001-3107061v3

620 E. Saddle River Road, Ho-Ho-Kus, is vacant land.
Purchase price in 2004: $12,500.
Appraised value: $730,000.

110 Lyons Ave., Newark.
Purchase price on April 30, 2003: $120,100.
Appraised value for “sale” on August 15, 2003: 279,900.
(133% in 4 months)

375 Leslie Street, Newark.
Purchase price on November 14, 2003: $129,900.
Appraised value for “sale” on December 17, 2003:
$280,000. (115.5% in 1 month)

195 Reynolds Street, Orange.
Purchase price on January 16, 2004: $41,100
Appraised value for “sale” on March 30, 2004: $190,000
(362% in 2.5 months)

143-145 Brookdale Ave., Newark.
Purchase price on June 2, 2004: $84,000
Appraised value for “sale” on September 1, 2004: $335,000
(291.84% in 3 months)

69-71 Columbia Ave., Newark.
Purchase price on December 6, 2004: $161,500
Appraised value for “sale” on December 3, 2004 [3 days
before title passed to the Debtor]: 326,000 (102% in less
than one day)

177 S. 9th Street, Newark
Purchase price on December 23, 2004: $122,500
Appraised value for “sale” on June 30, 2005: $380,000
(210% in 6 months)

mortgage fraud