Diamond Residential Mortgage Corporation, Illinois, entered into a settlement today under which the company will pay $1.2 million to eligible consumers who were defrauded by one of the company’s branch managers.

According to the investigation, allegations were made that Diamond’s Springfield branch manager, Chris R. Schaller defrauded individuals seeking mortgage loan. In some cases, borrowers believed they were obtaining a mortgage when Schaller actually placed them into a different type of transaction, a contract for deed, which can be financially riskier for borrowers than a traditional mortgage. Additionally, in some instances, consumers did not receive signed copies of their agreements with Schaller. In other instances, IDFPR found evidence that Schaller engaged in fraudulent loan origination activities. Madigan’s office is conducting a separate investigation of Chris Schaller, which is ongoing.

Attorney General Lisa Madigan with the Illinois Department of Financial and Professional Regulation (IDFPR) made the announcement.

Madigan entered the settlement, an assurance of voluntary compliance, with Diamond Residential Mortgage Corporation (Diamond), a residential mortgage company based in Lake Forest, Illinois. The agreement resolves an investigation by Madigan’s office and IDFPR into alleged mortgage fraud at Diamond’s Springfield branch.

I appreciate the Department of Financial and Professional Regulation’s partnership with my office to root out mortgage fraud at Diamond Residential’s Springfield branch,” Madigan said. “I encourage people to file a complaint with my office if they think they could qualify to receive compensation.

Under the settlement, Diamond agrees to pay $1.2 million that Madigan’s office will distribute to consumers defrauded by Schaller. Madigan’s office and IDFPR will work together to conduct a claims process for consumers who were aggrieved by Schaller’s practices to request compensation from a fund that will be managed by Madigan’s office. Consumers who wish to be considered for compensation from the $1.2 million fund should file a complaint with Madigan’s Consumer Fraud Bureau in Springfield. Complaint forms are available on Madigan’s website or by calling her Consumer Fraud Hotline at 1-800-243-0618.

Bureau Chief Elizabeth Blackston, Deputy Bureau Chief Paul Isaac and Assistant Attorney General Justin Tabatabai are handling the settlement for Madigan’s Consumer Protection Division.

Universal American Mortgage Company, LLC (UAMC) has agreed to pay the United States $13.2 million to resolve allegations that it violated the False Claims Act by falsely certifying that it complied with Federal Housing Administration (FHA) mortgage insurance requirements in connection with certain mortgages.  UAMC is a mortgage lender headquartered in Miami, Florida, doing business across the country, including in the Western District of Washington.

The United States alleged that between January 1, 2006, and December 31, 2011, UAMC knowingly submitted loans for FHA insurance that did not qualify.  The United States further alleged that UAMC improperly incentivized underwriters and knowingly failed to perform quality control reviews, which violated HUD requirements and contributed to UAMC’s submission of defective loans.

During the period covered by the settlement, UAMC participated as a direct endorsement lender (DEL) in the U.S Department of Housing and Urban Development’s (HUD’s) FHA insurance program.  A DEL has the authority to originate, underwrite and endorse mortgages for FHA insurance.  If a DEL approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, FHA’s parent agency, for the losses resulting from the defaulted loan.  Under the DEL program, the FHA does not review a loan for compliance with FHA requirements before it is endorsed for FHA insurance.  DELs are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance and to maintain a quality control program that can prevent and correct deficiencies in their underwriting practices.

The announcement was made by U.S. Attorney Annette L. Hayes.

Mortgage lenders may not ignore material FHA requirements designed to reduce the risk that borrowers will be unable to afford their homes and federal funds will be wasted,” said Assistant Attorney General Joseph H. Hunt for the Justice Department’s Civil Division.  “We will hold accountable entities that knowingly fail to follow important federal program requirements.”

“In a quest for profits, mortgage companies have ignored important lending standards” said U.S. Attorney for the Western District of Washington, Annette L. Hayes.  “Not only does this harm the borrowers leaving them over their heads in debt and underwater on their mortgages, it harms taxpayers because the mortgages are backed by government insurance.  This settlement should serve as a warning to other lenders to diligently follow the rules.

United States Attorney Joseph Harrington for the Eastern District of Washington said, “FHA mortgages are vital to first-time homebuyers and to families whose credit and assets were damaged by the 2008 economic crisis.  FHA underwriting and other requirements are critical to safeguarding the integrity of the public money used to operate this important program.  We will continue to work with our law enforcement partners to ensure that mortgage lenders and others who profit from this program, while ignoring its rules, will be held accountable.

One of our principle responsibilities is to protect and ensure the integrity of federal housing programs for the benefit of all Americans,” said Jeremy M. Kirkland, Acting Deputy Inspector General, U.S. Department of Housing and Urban Development, Office of Inspector General.  “This settlement demonstrates our resolve and should signal to irresponsible lenders that this conduct will not be tolerated.

FHA depends upon the lenders we do business with to apply our standards and to truthfully certify that they’ve done so,” said David Woll, HUD’s Deputy General Counsel for Enforcement.  “Working with our federal partners, HUD will enforce these lending standards so we can protect families from preventable foreclosure and to protect FHA from unnecessary losses.

The settlement resolves allegations originally brought by Kat Nguyen-Seligman, a former employee of a related UAMC entity, in a lawsuit filed under the whistleblower provisions of the False Claims Act, which allows private parties to bring suit on behalf of the federal government and to share in any recovery.  The whistleblower will receive $1,980,000 as her share of the federal government’s recovery in this case.

This matter was handled on behalf of the government by the Justice Department’s Civil Division, the U.S. Attorney’s Offices for the Eastern District of Washington and Western District of Washington, the Department of Housing and Urban Development, and the Department of Housing and Urban Development’s Office of the Inspector General.  case is captioned United States ex rel. Kat Nguyen-Selgiman v. Lennar Corporation, Universal American Mortgage Company, LLC, and Eagle Home Mortgage of California, Inc., 14-cv-1435 (W.D. Wash.).  The claims resolved by this settlement are allegations only, and there has been no admission of liability.

The settlement agreement is being handled by Assistant United States Attorney Kayla Stahman.

Robert McCloud, 39, most recently of Warrenville, South Carolina, was sentenced today to 18 months in prison on a federal wire fraud charge stemming from a real estate scheme in which he and others used forged deeds and fake driver’s licenses to fraudulently transfer ownership of District of Columbia homes from the rightful owners.

According to the government’s evidence, McCloud and others identified vacant or seemingly abandoned residential properties in the District of Columbia, and then prepared and filed forged deeds with the District of Columbia’s Recorder of Deeds transferring the properties into fictitious names. Next, they agreed to sell these properties to legitimate purchasers and arranged with unsuspecting title and escrow companies to finalize the sale and transfer ownership. Finally, they shared the fraudulently-obtained sales proceeds amongst themselves.

In his guilty plea, McCloud admitted taking part in two such fraudulent transactions within a two-month period of 2015, which generated a total of $580,482 in proceeds.

In the first, in April 2015, McCloud filed a forged Intra-Family deed with the District of Columbia’s Recorder of Deeds purporting to show that a home in the unit block of K Street NW, Washington, D.C., was transferred from the true owners to a fictitious person.  The true owners, who owned the home outright without any mortgage liens, did not sign the deed and did not give anyone permission to transfer their home. McCloud then appeared at the title company pretending to be the owner in order to close the transaction, presenting a California driver’s license with his photograph but in the name of the fictitious person, signing the settlement documents and selling the property. The title company sent by wire transfer $195,527 to a bank account opened in the name of the fictitious person. McCloud withdrew approximately $43,000 of the funds before the crime was discovered; the rest of the funds were returned to the title company.

In the second transaction, in May 2015, a conspirator arranged for a forged deed with respect to another home, in the 6400 block of 16th Street NW, Washington D.C., to be filed with the Recorder of Deeds. As with the other property, the true owners, who owned the home outright without any mortgage liens, did not sign the deed and did not give anyone permission to sell the residence. In June 2015, McCloud appeared at the title company pretending to be the owner and using another fake California driver’s license with his photograph.  He again signed the settlement documents in the fictitious name. The title company sent by wire transfer $384,955 to a bank account opened in the name of the fictitious person. McCloud was arrested the following day.

The true owners of the homes, who are elderly, have faced difficult and lengthy proceedings in order to retitle the properties in their own names. Unwinding the fraudulent transfer is merely the first step for the victims to reclaim their ownership and interest in the properties and each must now settle various outstanding bills.

Although McCloud received $580,482 in proceeds from his wire fraud scheme regarding both real properties, law enforcement seized a total of $369,990, which was later administratively forfeited.  These forfeited funds, and the partial return of funds to the title company from the K Street transaction, reduced the amount owed in forfeiture to $57,965, which is the amount of the forfeiture money judgment.

McCloud pled guilty in June 2018, in the U.S. District Court for the District of Columbia. He was sentenced by the Honorable Amit P. Mehta. In addition to his prison term, McCloud must pay restitution in an amount to be set later by the Court, as well as a forfeiture money judgment of $57,965. Following his prison term, he will be placed on three years of supervised release, the first six months of which is to be spent in home confinement. McCloud also will be required to perform 150 hours of community service.

The announcement was made by U.S. Attorney Jessie K. Liu, Nancy McNamara, Assistant Director in Charge of the FBI’s Washington Field Office, and Peter Newsham, Chief of the Metropolitan Police Department (MPD).

In announcing the sentence, U.S. Attorney Liu, Assistant Director in Charge McNamara, and Chief Newsham commended the work performed by those who investigated the case from the FBI’s Washington Field Office and the Metropolitan Police Department. They acknowledged the efforts of those who worked on the case from the U.S. Attorney’s Office, including Assistant U.S. Attorneys Diane Lucas and Stephanie Miller, former Paralegal Specialist Christopher Toms, Paralegal Specialist Aisha Keys, and Litigation Technology Specialist Leif Hickling. Finally, they commended the work of Assistant U.S. Attorney Virginia Cheatham, who prosecuted the case.

James Gerard Temme, 50, Plano, Texas has been sentenced today to federal prison for wire fraud.

According to information presented in court, in 2011, Temme engaged in wire fraud by inducing individuals to invest in a package of mortgages, misrepresenting that he had the ability to sell the package to the investors.  Temme provided a forged signature to induce the investment, eventually receiving over $3 million from the investors, when in fact he never actually sold the package of mortgages to the investors.  Temme was indicted by a federal grand jury on Sep. 21, 2016 and charged with federal violations.

Temme pleaded guilty on Oct. 11, 2017, to wire fraud and was sentenced to 78 months in federal prison on Oct. 16, 2018 by U.S. District Judge Marcia A. Crone.  Temme was also ordered to pay restitution in the amount of $2,933,667.48.

U.S. Attorney Joseph D. Brown made the announcement.

“White collar theft often hurts victims just as much as thefts that happen with a gun,” said U.S. Attorney Joseph D. Brown. “This was a lot of money.  I am proud of the FBI investigators for pursuing it aggressively, and a prison sentence was wholly justified in this case.”

Mr. Temme, knowingly acted in an unscrupulous and reckless manner to entice many innocent people into making investments that were unsound,” said Eric K. Jackson, FBI Special Agent in Charge of the Dallas Division. “Economic fraud is becoming common place, but we will continue to target the offenders and bring the appropriate charges, while protecting the citizens’ rights to fair and trustworthy services.”

This case was investigated by the Federal Bureau of Investigation and prosecuted by the U.S. Attorney’s Office for the Eastern District of Texas.

 

Nomura Holding America Inc. and several of its affiliates (“Nomura”) have reached an agreement with the United States where it will pay a $480 million penalty to resolve federal civil claims that Nomura misled investors in connection with the marketing, sale and issuance of residential mortgage-backed securities (“RMBS”) between 2006 and 2007.  Nomura’s investors, which included university endowments, retirement funds and federally insured financial institutions, suffered significant losses due to Nomura’s misconduct.

The settlement stems from allegations that Nomura knowingly securitized defective mortgage loans in its RMBS and misled investors regarding the quality and characteristics of those loans.  For example, the United States alleged that:

  • In presentations regarding its RMBS program, Nomura claimed that its due diligence process was “extensive,” “disciplined” and “carefully developed.”  Nomura also told investors that it only worked with “hand-picked industry leading” due diligence vendors, and that, as a result of its superior standards and due diligence processes, “Nomura’s loan performance should surpass industry standards.”  These claims were false.  Nomura knew, based on its due diligence, that thousands of loans that it securitized in its RMBS did not comply with applicable underwriting guidelines or were supported by inflated and potentially fraudulent appraisals.  Nomura concealed these deficiencies from investors, securitizing many of these defective loans as “favors” to loan originators—including, for example, loans that one originator openly described to Nomura as “dogsh[*]t.”  As stated by a member of Nomura’s RMBS due diligence group: “There is no such thing as a bad loan . . . just a bad price.”
  • Nomura also knew that a significant number of loans that it securitized in its RMBS had not gone through Nomura’s stated due diligence process, and, more broadly, that its process had been compromised.  Nomura’s head of RMBS due diligence (in the context of proposed changes to Nomura’s loan-by-loan buying program) stated that Nomura was “turning into the lemming of the mortgage business,” “following the herd” and compromising its standards “to comply with the masses in p[u]rsuit of volume.”  Additionally, a member of Nomura’s RMBS group’s origination sales team, in an email to the entire RMBS group, remarked that “advertising will be a great career when all these loans finally blow up . . . . (I will be selling vacuum cleaners door to door when the market goes by the way).”
  • Despite this knowledge, Nomura failed to address the weaknesses in its due diligence processes, and continued to do business with originators that, according to its own due diligence personnel, were “extremely dysfunctional,” had “systemic” underwriting issues and employed “questionable” origination practices.  Indeed, Nomura’s securitization of defective loans in the subject deals—in spite of numerous red flags—reflected a conscious decision by senior Nomura personnel to compete for market share in a highly competitive RMBS market.  As stated by one member of Nomura’s RMBS team, Nomura could not just “buck the entire marketplace when [it was] hammered to grow.”
  • Likewise, despite knowing that its due diligence was ineffective and did not remove large numbers of defective loans from its RMBS, in mid-2006, Nomura announced new, “more liberal” underwriting guidelines for its loan-by-loan purchase program.  Although Nomura’s head of RMBS due diligence warned that Nomura had already “loosened guidelines in so many areas” and that it was “at risk of giving away the proverbial store,” the prevailing view, as characterized by Nomura’s RMBS trading desk, was that Nomura’s “box [was] too restrictive.”  Nomura’s new guidelines allowed for the purchase of loans that Nomura’s due diligence personnel previously described as “sheer lunacy.”

These are allegations only, which Nomura disputes, and there has been no trial or adjudication or judicial finding of any issue of fact or law.

Richard P. Donoghue, United States Attorney for the Eastern District of New York, and Jennifer Byrne, Associate Inspector General, Federal Housing Finance Agency-Office of Inspector General (FHFA-OIG), announced the settlement.

This settlement holds Nomura accountable for its fraudulent conduct in connection with its Residential Mortgage-Backed Securities offerings, which caused substantial harm to investors and contributed to the financial crisis of 2008,” stated United States Attorney Donoghue.  “The Department of Justice, this Office and our partners will continue to aggressively pursue wrongdoing in our financial markets, including, as appropriate, financial crisis-era misconduct.

The actions of Nomura resulted in significant losses to investors, including Fannie Mae and Freddie Mac, which purchased Nomura Residential Mortgage-Backed Securities backed by defective loans,” stated FHFA-OIG Associate Inspector General Byrne.  “We are proud to have partnered with the U.S. Attorney’s Office for the Eastern District of New York on this matter.”

The settlement was the result of a multi-year investigation by the Civil Division of the U.S. Attorney’s Office for the Eastern District of New York, pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.  Assistant U.S. Attorney Clayton P. Solomon and former Assistant U.S. Attorney Morgan J. Brennan led the government’s investigation.

 

Daniel Barraza Nevarez, Arizona, has plead guilty to two felony counts of Fraudulent Schemes & Artifices and Money Laundering in connection with an alleged scam designed to defraud homeowners and lenders.

Between November 2017 and February 2018, Nevarez filed a series of fraudulent quit-claim deeds transferring him ownership of single family homes in Paradise Valley, Scottsdale, and Phoenix. Nevarez then attempted to use the victims’ homes as collateral to secure cash loans. Nevarez used a false identity to execute this fraud, but his true identity was discovered through an undercover operation conducted by agents of the Arizona Attorney General’s Office and Scottsdale Police Department. http://www.mortgagefraudblog.com/?s=Daniel+Barraza+Nevarez+

The plea agreement requires Nevarez to pay $21,708.43 in restitution for legal fees incurred by the victims as a result of these crimes. Nevarez will also serve no less than eight months in Maricopa County Jail.

Attorney General Mark Brnovich made the announcement.

Assistant Attorney General Adam J. Schwartz prosecuted the case.

Nevarez will be sentenced on November 8, 2018, at Maricopa County Superior Court.

Mark Savransky, New York, pleaded guilty today to scamming 32 homeowners out of $568,000 in a mortgage modification scheme.

The defendant operated a mortgage modification business in Nassau County, New York using the name Mark Savran. Between 2008 and 2014, he promised 32 homeowners in Nassau County and elsewhere that after securing modifications, he would hold their mortgage payments in trust and forward them to the financial institutions servicing the homeowners’ mortgages.

Instead, the defendant converted the funds for personal use, stealing approximately $568,000 from these homeowners. Among other things, Savransky used the funds for ATM cash withdrawals, credit card payments, child support, car payments, gasoline, travel expenses, restaurants, grocery stores, department stores and Netflix.

Savransky’s clients were typically residential homeowners who had purchased their homes using a subprime adjustable rate mortgage sometime between 2006 and 2009. When the payments became more than the homeowner could afford, homeowners hired the defendant to assist in obtaining a mortgage modification.

Savransky requested that all paperwork from the bank be given to him and if additional paperwork was sent by the bank to the victim, he demanded that it be given to him immediately, preferably unopened.

The defendant then counseled clients to give him the monthly mortgage payment that was due under the modified mortgage. Savransky informed his clients that he would make the payments on their behalf and, in doing so, create a record of payment that would prevent a lender from denying that payments were made or from reneging on any mortgage modification that was obtained. At the defendant’s request, these payments were mostly made in cash or by check that did not include the payee. Savransky later completed the payee portion of the check, thereby giving him the means to misappropriate the funds.

 Because the mortgage payments weren’t made, lenders started to foreclose on the properties belonging to the defendant’s clients. When some of the homeowners complained to him, some of them received a limited amount of repayment.

Savransky’s victims include residents from Amityville, Baldwin, Bayside, Brentwood, the Bronx, Brooklyn, East Northport, Farmingdale, Hempstead, Hicksville, Huntington, Levittown, Lynbrook, Malverne, Merrick, Mount Vernon, New Hyde Park, Queens Village, Richmond Hill, Riverhead, Uniondale and, Westbury, New York.

The defendant was arrested in August 2015 by NCDA detective investigators and arraigned on grand jury indictment charges in October 2017.

Savransky pled guilty to two counts of Grand Larceny in the Second Degree (a C felony) and one count of Scheme to Defraud Second Degree (an A misdemeanor)

The defendant faces a maximum of one to six years in prison when he is sentenced on January 10. He is due back in court on December 4.

The announcement was made by Nassau County District Attorney Madeline Singas.

This defendant preyed on vulnerable homeowners during the height of the mortgage crisis and swindled them out of more than a half million dollars,” DA Singas said. “In many cases, homeowners didn’t know they were in trouble until lenders started foreclosing on their homes. I thank the Bronx District Attorney’s Office, the Suffolk County District Attorney’s Office and the Suffolk County Police Department for referring these cases to us for prosecution.”

This case was initially referred to the Nassau County District Attorney’s Office by the Bronx County District Attorney’s Office. Additional cases were also referred by the Suffolk County District Attorney’s Office in conjunction with the Suffolk County Police Department.

Deputy Bureau Chief Peter Mancuso of DA Singas’ Financial Crimes Bureau is prosecuting this case. Joseph Conway, Esq. represents the defendant.

 

ATLANTIC COUNTY, N.J. (CBS) – Atlantic County Prosecutor Damon Tyner is the subject of a letter sent to the New Jersey Attorney General’s Office requesting an investigation into possible mortgage fraud, unethical practices within the office and hiding evidence pertaining to the April Kauffman case.

Source: Atlantic County Prosecutor Damon Tyner Accused Of Mortgage Fraud, Ethics Violations In Kauffman Murder Case « CBS Philly

It was announced today that HSBC will pay $765 million to settle claims related to its packaging, securitization, issuance, marketing and sale of residential mortgage-backed securities (RMBS) between 2005 and 2007.  During this period, federally-insured financial institutions and others suffered major losses from investing in RMBS issued and underwritten by HSBC.  Under the settlement, HSBC will pay the $765 million as a civil penalty pursuant to the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).

FIRREA authorizes the federal government to seek civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud.  The United States alleged that HSBC violated FIRREA by misrepresenting to investors the quality of its RMBS and the due diligence procedures it claimed it would use to ensure that quality.  The United States’ allegations are described in the settlement agreement at paragraph 3.

The United States alleged that HSBC had a due diligence process for reviewing the loans HSBC planned to securitize as RMBS, but as early as 2005, an HSBC credit risk manager expressed concerns with HSBC’s due diligence process.  HSBC nevertheless touted its due diligence process to potential investors.  It told investors that when it purchased pools of subprime loans, HSBC would review at least 25% of the loans in the pool for credit and compliance.  It told investors that it selected 20% of the loan pool as an “adverse sample” based on “a proprietary model, which will risk-rank the mortgage loans in the pool.”  But on some loan pools, HSBC’s RMBS trading desk influenced how the risk management group selected loans for the adverse portion of the sample, and as a result, the sample was not based on its model.  HSBC also told investors that it selected another 5% of the loan pool as a “random sample.”  But in some instances, HSBC used a random sample that was less than 5% of the pool, or used a sample that was not random at all.

To review the loans HSBC did select for review, HSBC used due diligence vendors, and HSBC saw the results of the vendors’ reviews of the loans before the deals were issued.  Over a one-and-a-half year period, between January 2006 and June 2007, HSBC’s primary due diligence vendor flagged over 7,400 loans as having low grades—more than one out of every four loans the vendor reviewed for HSBC during that time.  When HSBC employees saw loans with low grades, they sometimes “waived” those loans through or recategorized the grades to make the due diligence “percentages look better.”  They also expressed views about the deals they were issuing.  For example, in 2007, an HSBC trader said, in reference to an RMBS that HSBC was about to issue, “it will suck.”

For a loan pool HSBC purchased in 2006, HSBC learned of what employees referred to as an “abnormally large” and “alarmingly” high number of payment defaults.  HSBC had purchased the loan pool but had not securitized it yet.  Early payment defaults (EPDs)—when a borrower fails to make one of the first few payments on a mortgage—could be, in the words of HSBC’s co-head of RMBS, “an indicator of higher expected loss on the pool.”  In an internal email, HSBC’s head of risk management for RMBS wrote that the high EPD rate could be a sign of systemic problems with the pool.  Others within HSBC’s risk management group expressed concern that the pool “may be contaminated” and asked whether “they should hold back on the securitization launch until there is further clarity on all the issues….”  The next day, the head of HSBC’s whole loan trading risk management group stated that he was “comfortable that we need not make any further disclosures to investors….”  HSBC issued the securitization a few days later.  A later post-close quality control review indicated that loans that “appear to have fraud or misrep” went into the securitization.  HSBC went on to buy and securitize more loans from the same originator, even after the head of HSBC’s due diligence team concluded that the originator had offered “bad collateral.”

After purchasing certain loan pools, HSBC ordered a quality control review but did not wait for the final results before issuing the securitization.  On two pools, HSBC received preliminary quality control results before the issuance of the securitization that, according to the quality control vendor, showed indications of fraud in the origination of particular loans, but included those loans in the RMBS anyway.  On a loan pool in 2007, HSBC performed post-close due diligence on a sample of loans from that pool.  HSBC’s due diligence vendor graded approximately 30% of the loans in the post-close due diligence sample as having the lowest grade.  HSBC went on to securitize loans from that same pool without any further credit or compliance review before securitization.

These are allegations only, which HSBC disputes and does not admit.

U.S. Attorney Bob Troyer made the announcement.

HSBC made choices that hurt people and abused their trust,” said Bob Troyer, United States Attorney for the District of Colorado.  “HSBC chose to use a due diligence process it knew from the start didn’t work.  It chose to put lots of defective mortgages into its deals.  When HSBC saw problems, it chose to rush those deals out the door.  When deals went south, investors who trusted HSBC suffered.  And when the mortgages failed, communities across the country were blighted by foreclosure.  If you make choices like this, beware.  You will pay.”

The actions of HSBC resulted in significant losses to investors, which purchased the HSBC Residential Mortgage-Backed Securities backed by defective loans,” said Associate Inspector General Jennifer Byrne of the Federal Housing Finance Agency-Office of Inspector General (FHFA-OIG). “We are proud to have partnered with the U.S Attorney’s Office for the District of Colorado on this matter.”

Assistant U.S. Attorneys Kevin Traskos, Jasand Mock, Ian J. Kellogg, Hetal J. Doshi, and Lila M. Bateman of the District of Colorado investigated this matter, with the support of the Federal Housing Finance Agency’s Office of the Inspector General (FHFA-OIG).

To report RMBS fraud, go to: http://www.stopfraud.gov/rmbs.html.

David Tipton, 52, Alexandria, Virginia, was sentenced today to a year and a day in prison for defrauding lenders who provided him with nearly $710,000 towards the purchase and renovation of a residential property in Northeast Washington.

According to the government’s evidence, Tipton owned a company that was created to purchase, renovate, and sell residential real estate in the District of Columbia and Virginia. He signed a contract in January 2013 to purchase a property in the 500 block of 14th Street NE, Washington, DC for $450,000 in cash, planning to renovate and sell the property for a profit. He falsely represented that he had the required funds available to close the cash transaction and created a false bank statement to back up the claim. In fact, almost all of the money for the purchase was coming from two unrelated private individuals whom he had met at a real estate investment seminar. Each of them provided Tipton with $224,497, for a total of $448,994, in return for Deeds of Trust securing their interest in the property.  Tipton did not tell the settlement company about the loans.  As a result, the Deeds of Trust were not recorded.

Additionally, Tipton later obtained $260,000 from a private money lender to renovate the property.  Tipton did not disclose to the lender that two other individuals held Deeds of Trust in the property.

Tipton pled guilty in May 2018, in the U.S. District Court for the District of Columbia, to a charge of mail fraud. He was sentenced by the Honorable Senior Judge Paul L. Friedman. Following his prison term, he will be placed on three years of supervised release. He also must pay $448,994 in restitution, as well as an identical amount in a forfeiture money judgment.

The announcement was made by U.S. Attorney Jessie K. Liu and Nancy McNamara, Assistant Director in Charge of the FBI’s Washington Field Office.

In announcing the sentence, U.S. Attorney Liu and Assistant Director in Charge McNamara commended the work of those who investigated the case from the FBI’s Washington Field Office. They also expressed appreciation for the work of those who handled the case for the U.S. Attorney’s Office, including former Assistant U.S. Attorney John P. Marston, former Criminal Investigator Juan Juarez, Paralegal Specialist Aisha Keys, and former Paralegal Specialist Kristy Penny. Finally, they commended the work of Assistant U.S. Attorney Anthony Saler, who investigated and prosecuted the case.