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The Royal Bank of Scotland Group plc (RBS Group) has entered into a $4.9 billion settlement today resolving federal civil claims that RBS Group’s subsidiaries in the United States (RBS) misled investors in the underwriting and issuing of residential mortgage-backed securities (RMBS) between 2005 and 2008. The penalty is the largest imposed by the Justice Department for financial crisis-era misconduct at a single entity under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, which allows the Justice Department to seek civil penalties for violations of criminal statutes.

The settlement includes a statement of facts that details – using contemporaneous calls and emails of RBS executives – how RBS routinely made misrepresentations to investors about significant risks it failed to disclose about its RMBS. For example:

  • RBS failed to disclose systemic problems with originators’ loan underwriting. RBS’s reviews of loans backing its RMBS (known as “due diligence”) confirmed that loan originators had failed to follow their own underwriting procedures, and that their procedures were ineffective at preventing risky loans from being made. As a result, RBS routinely found that borrowers for the loans in its RMBS did not have the ability to repay and that appraisals for the properties guaranteeing the loans had materially inflated the property values. RBS’s RMBS contained, as its Chief Credit Officer put it, “total f***ing garbage” loans with “random” and “rampant” fraud that was “all disguised to, you know look okay kind of . . . in a data file.” RBS never disclosed that these material risks both existed and increased the likelihood that loans in its RMBS would default.
  • RBS changed due diligence findings without justification. RBS’s due diligence practices did not remove fraudulent and high-risk loans from its RMBS. In fact, RBS executives internally discussed how RBS’s due diligence process was “just a bunch of bullsh**.” For example, when RBS’s due diligence vendors graded loans materially defective, RBS frequently directed the vendors to “waive” the defects without justification. One due diligence vendor, which tracked waivers by most major participants in the RMBS industry, concluded that RBS waived material defects 30% more frequently than the industry average. RBS’s waiver of material defects routinely resulted in the securitization of loans with excessive risk. When it engaged in such waivers, RBS never included enhanced “scratch-and-dent” disclosures that would have alerted investors that loans with excessive risks were included in the RMBS.
  • RBS provided investors with inaccurate loan data. RBS’s due diligence frequently found that loan data – which RBS passed on to investors, who used the data to analyze the risks associated with its RMBS – were riddled with errors. Many inaccuracies made the loans look less risky than they actually were. RBS, however, did not require originators to correct the data errors. In one deal, where RBS identified over 600 data errors associated with 563 loans (including debt-to-income ratios understated by as much as 2700%), RBS failed to disclose these errors even to the originator; instead, RBS reassured the originator that RBS had not required originators to correct data errors in the past and did not anticipate doing so for that deal.
  • RBS failed to disclose due diligence and kick-out caps. To develop and maintain business relations with originators, RBS agreed to limit the number of loans it could review (due diligence caps) and/or limit the number of materially defective loans it could remove from a RMBS (kick-out caps). RBS’s scheme reached its height in two deals issued in October 2007. In both of these RMBS, RBS identified hundreds of underlying loans that carried a particularly high risk of default and would cause losses to the RMBS investors. RBS kept these materially risky loans in the RMBS, without disclosing their inclusion to investors, because RBS had agreed to a kick-out cap limiting the number of defective loans that RBS could exclude from the securities in exchange for receiving a lower price for the loan pool. As a result, over the entirety of its scheme, RBS securitized tens of thousands of loans that it determined or suspected were fraudulent or had material problems without disclosing the nature of the loans to investors.

Through its scheme, RBS earned hundreds of millions of dollars, while simultaneously ensuring that it received repayment of billions of dollars it had lent to originators to fund the faulty loans underlying the RMBS. RBS used RMBS to push the risk of the loans, and tens of billions of dollars in subsequent losses, onto unsuspecting investors across the world, including non-profits, retirement funds, and federally-insured financial institutions. As losses mounted, and after many mortgage lenders who originated those loans had gone out of business, RBS executives showed little regard for this misconduct and made light of it.

U.S. Attorney Lelling, Acting Associate Attorney General Panuccio and FHFA-OIG Associate Inspector General Byrne made the announcement.

This resolution – the largest of its kind – holds RBS accountable for defrauding the people and institutions that form the backbone of our investing community,” said Andrew E. Lelling, U.S. Attorney for the District of Massachusetts. “Despite assurances by RBS to its investors, RBS’s deals were backed by mortgage loans with a high risk of default. Our settlement today makes clear that institutions like RBS cannot evade responsibility for the damage caused by their illicit conduct, and it serves as a reminder that the Justice Department, and this Office, will hold those who engage in fraudulent conduct accountable.”

Many Americans suffered lasting economic harm as a result of the 2008 financial crisis,” said Acting Associate Attorney General Jesse Panuccio. “This settlement holds RBS accountable for serious misconduct that contributed to that financial crisis, and it sends an important message that the Department of Justice will pursue financial institutions that illicitly harm the American economy and our consumers.”

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

These are allegations only, which RBS disputes and does not admit, and there has been no trial or adjudication or judicial finding of any issue of fact or law.

Assistant U.S. Attorneys Justin D. O’Connell, Brian M. LaMacchia, Elianna J. Nuzum, Steven T. Sharobem, and Sara M. Bloom of Lelling’s Office handled the matter.

Greisy Jimenez, 50, Methuen, Massachusetts, a real estate broker, was sentenced today in connection with a sweeping conspiracy to defraud banks and mortgage companies by engaging in sham “short” sales of residential properties in Merrimack Valley, Massachusetts.

Three co-conspirators involved in the scheme have been sentenced after pleading guilty to conspiracy to commit bank fraud. In June 2018, Jasmin Polanco, 37, Methuen, Massachusetts, a real estate closing attorney, was sentenced to 15 months in prison, three years of supervised release and ordered to pay $1,224,489 in restitution. In May 2018, Vanessa Ricci, 41, Methuen, Massachusetts, a mortgage loan officer, was sentenced to six months in prison, three years of supervised release and ordered to pay restitution of $963,730. In March 2017, Hyacinth Bellerose, 51, Dunstable, Massachusetts, a real estate closing attorney, was sentenced to time served and one year of supervised release to be served in home detention. http://www.mortgagefraudblog.com/?s=Greisy+Jimenez

The charges arose out of a scheme to defraud various banks via bogus short sales of homes in Haverhill, Lawrence and Methuen, Massachusetts in which the purported sellers remained in their homes with their debt substantially reduced. A short sale is a sale of real estate for less than the value of any existing mortgage debt on the property. Short sales are an alternative to foreclosure that typically occur only with the consent of the mortgage lender. Generally, the lender absorbs a loss on the loan and releases the borrower from the unpaid balance. By their very nature, short sales are intended to be arms-length transactions in which the buyers and sellers are unrelated, and in which the sellers cede their control of the subject properties in exchange for the short-selling bank’s agreement to release them from their unpaid debt.

The conspiracy began in approximately August 2007 and continued through June 2010, a period that included the height of the financial crisis and its aftermath. Home values in Massachusetts and across the nation declined precipitously, and many homeowners found themselves suddenly “underwater” with homes worth less than the mortgage debt they owed. As part of the scheme, Jimenez, Polanco, Ricci, Bellerose and others submitted materially false and misleading documents to numerous banks in an effort to induce them to permit the short-sales, thereby releasing the purported sellers from their unpaid mortgage debts, while simultaneously inducing the purported buyers’ banks to provide financing for the deals. In fact, the purported sellers simply stayed in their homes, with their debt substantially reduced.

The conspirators falsely led banks to believe that the sales were arms-length transactions between unrelated parties; in fact, the buyers and sellers were frequently related, and the sellers retained control of (and frequently continued to live in) the properties after the sale. The conspirators also submitted phony earnings statements in support of loan applications that were submitted to banks in order to obtain new financing for the purported sales. In addition, the defendants submitted phony “HUD-1 Settlement Statements” to banks that did not accurately reflect the disbursement of funds in the transactions. HUD-1 Settlement Statements are standard forms that are used to document the flow of funds in real estate transactions. They are required for all transactions involving federally related mortgage loans, including all mortgages insured by the Federal Housing Administration.

Jimenez was sentenced by U.S. Senior District Court Judge Mark L. Wolf, to three years in prison, four years of supervised release, and ordered to pay a fine of $12,500. The court will determine issues of restitution and forfeiture on Aug. 29, 2018. In January 2018, Jimenez pleaded guilty to two counts of bank fraud and one count of conspiracy to commit bank fraud.

United States Attorney Andrew E. Lelling; Christina Scaringi, Special Agent in Charge of the Department of Housing and Urban Development, Office of Inspector General, New York Field Office; and Christy Goldsmith Romero, Special Inspector General of the Troubled Asset Relief Program, made the announcement. Assistant U.S. Attorney Stephen E. Frank, Chief of Lelling’s Economic Crimes Unit, and Assistant U.S. Attorneys Sara Miron Bloom and Victor A. Wild, also of the Economic Crimes Unit, prosecuted the cases.

It was announced today that HSBC Securities (HSBC) will pay $26.8 million to settle allegations that it purchased and securitized unfair residential mortgage loans in violation of Massachusetts law.

Today’s case follows others brought by the AG’s Office against investment giants Goldman Sachs, Morgan Stanley, Royal Bank of Scotland, Countrywide Securities, JPMorgan, and Citibank regarding their roles in the subprime lending crisis. In pursuing these cases, the AG’s Office has recovered more than $375 million, including relief for thousands of residents across the state, in connection with securitization claims.

While HSBC did not originate the subprime loans in this case, it did purchase these loans from subprime lenders and securitize them. As noted in the assurance of discontinuance, filed Friday in Suffolk Superior Court, the AG’s Office alleges that many of these loans were presumptively unfair under Massachusetts law because they had debt-to-income ratios over 50 percent, included substantial prepayment penalties, had loan-to-value ratios over 97 percent, and included other problematic features.

Under the terms of the settlement, HSBC will pay a $5 million payment to the Commonwealth and compensate governmental entities that allegedly suffered harm from HSBC’s actions, including cities and towns that incurred extra expenses due to the foreclosures caused by the unfair loans, such as Brockton, Lawrence, Lowell, Lynn, Springfield, and Worcester, Massachusetts. The remaining $20 million will be made available to eligible homeowners for principal reductions and related payments on the loans of eligible consumers and to assist borrowers who suffered foreclosure.

More than 60 homeowners could be eligible to receive payments in Middlesex and Worcester counties under the HSBC settlement. Approximately 50 homeowners could be eligible to receive payments in Essex county, Massachusetts. Approximately 25 homeowners could be eligible to receive payments in Bristol, Hampshire, Norfolk, Plymouth, and Suffolk counties, Massachusetts. Eligible consumers will receive a notice from the Office of the Attorney General. Homeowners with questions should contact Attorney General’s Insurance and Financial Services Hotline at 1-888-830-6277.

Attorney General Maura Healey made the announcement.

HSBC’s securitization practices contributed to a financial crisis that deeply harmed Massachusetts communities and caused families to lose their homes,” AG Healey said. “We will continue to help consumers who were sold toxic mortgages by these banking institutions and are pleased that this settlement will provide significant relief for families that have suffered harm from unsustainable subprime loans.”

The HSBC case was handled by the staff of Attorney General Maura Healey’s Insurance and Financial Services Division, including Brook Kellerman, Burt Feinberg, Madonna Cournoyer, Peter Leight, Lilia DuBois, Diane Prend, and Glenn Kaplan.

Jasmin Polanco, 37, Methuen, Massachusetts, a real estate attorney was sentenced today in connection with a sweeping conspiracy to defraud banks and mortgage companies by engaging in sham “short” sales of residential properties in Merrimack Valley, Massachusetts.

Co-defendants Vanessa Ricci, 41, Methuen, Massachusetts , a  mortgage loan officer, pleaded guilty in March 2018 to one count of conspiracy to commit bank fraud and was sentenced to six months in prison, three years of supervised release and ordered to pay restitution of $963,730 http://www.mortgagefraudblog.com/?s=Jasmin+Polanco; Greisy Jimenez, 50, Methuen, Massachusetts , a real estate broker, pleaded guilty to two counts of bank fraud and one count of conspiracy to commit bank fraud and is awaiting sentencing; Hyacinth Bellerose, 51, Dunstable, Massachusetts,  a real estate closing attorney, was sentenced in March 2017 to time served and one year of supervised release to be served in home detention after pleading guilty to conspiracy to commit bank fraud.  Polanco was sentenced by U.S. Senior District Court Judge Douglas P. Woodlock to 15 months in prison, three year of supervised release and ordered to pay $1,224,489 in restitution. In March 2018, Polanco pleaded guilty to one count of conspiracy to commit bank fraud.

The charges arose out of a scheme to defraud various banks via bogus short sales of homes in Haverhill, Lawrence and Methuen, Massachusetts, in which the purported sellers remained in their homes with their debt substantially reduced. A short sale is a sale of real estate for less than the value of any existing mortgage debt on the property. Short sales are an alternative to foreclosure that typically occur only with the consent of the mortgage lender. Generally, the lender absorbs a loss on the loan and releases the borrower from the unpaid balance. By their very nature, short sales are intended to be arms-length transactions in which the buyers and sellers are unrelated, and in which the sellers cede their control of the subject properties in exchange for the short-selling bank’s agreement to release them from their unpaid debt.

The conspiracy began in approximately August 2007 and continued through June 2010, a period that included the height of the financial crisis and its aftermath. Home values in Massachusetts and across the nation declined precipitously, and many homeowners found themselves suddenly “underwater” with homes worth less than the mortgage debt they owed. As part of the scheme, Polanco, Jimenez, Ricci, Bellerose and others submitted materially false and misleading documents to numerous banks in an effort to induce them to permit the short-sales, thereby releasing the purported sellers from their unpaid mortgage debts, while simultaneously inducing the purported buyers’ banks to provide financing for the deals. In fact, the purported sellers simply stayed in their homes, with their debt substantially reduced.

The conspirators falsely led banks to believe that the sales were arms-length transactions between unrelated parties; in fact, the buyers and sellers were frequently related, and the sellers retained control of (and frequently continued to live in) the properties after the sale. The conspirators also submitted phony earnings statements in support of loan applications that were submitted to banks in order to obtain new financing for the purported sales. In addition, the defendants submitted phony “HUD-1 Settlement Statements” to banks that did not accurately reflect the disbursement of funds in the transactions. (HUD-1 Settlement Statements are standard forms that are used to document the flow of funds in real estate transactions. They are required for all transactions involving federally related mortgage loans, including all mortgages insured by the Federal Housing Administration.)

United States Attorney Andrew E. Lelling; Christina Scaringi, Special Agent in Charge of the Department of Housing and Urban Development, Office of Inspector General, New York Field Office; and Christy Goldsmith Romero, Special Inspector General of the Troubled Asset Relief Program, made the announcement. Assistant U.S. Attorney Stephen E. Frank, Chief of Lelling’s Economic Crimes Unit, and Assistant U.S. Attorneys Sara Miron Bloom and Victor A. Wild, also of the Economic Crimes Unit, prosecuted the cases.

Vanessa Ricci, 41, Methuen, Massachusetts, a mortgage loan officer, was sentenced yesterday in federal court in connection with a sweeping conspiracy to defraud banks and mortgage companies by engaging in sham “short” sales of residential properties in Merrimack Valley, Massachusetts.

Ricci was sentenced to six months in prison, three years of supervised release and ordered to pay restitution of $963,730. In March 2018, Ricci pleaded guilty to one count of conspiracy to commit bank fraud. http://www.mortgagefraudblog.com/?s=Vanessa+Ricci

Co-defendants Jasmin Polanco, 37, a real estate closing attorney, previously pleaded guilty to one count of conspiracy to commit bank fraud and is scheduled to be sentenced on June 21, 2018;  Greisy Jimenez, 50, pleaded guilty to two counts of bank fraud and one count of conspiracy to commit bank fraud and is scheduled to be sentenced on June 6, 2018; Hyacinth Bellerose, 51, a real estate closing attorney, was sentenced in March 2017 to time served and one year of supervised release to be served in home detention after pleading guilty to conspiracy to commit bank fraud.

The charges arose out of a scheme to defraud various banks via bogus short sales of homes in Haverhill, Lawrence and Methuen, Massachusetts in which the purported sellers remained in their homes, with their debt substantially reduced. A short sale is a sale of real estate for less than the value of any existing mortgage debt on the property. Short sales are an alternative to foreclosure that typically occur only with the consent of the mortgage lender. Generally, the lender absorbs a loss on the loan and releases the borrower from the unpaid balance. By their very nature, short sales are intended to be arms-length transactions in which the buyers and sellers are unrelated, and in which the sellers cede their control of the subject properties in exchange for the short-selling bank’s agreement to release them from their unpaid debt.

The conspiracy began in approximately August 2007 and continued through June 2010, a period that included the height of the financial crisis and its aftermath. Home values in Massachusetts and across the nation declined precipitously, and many homeowners found themselves suddenly “underwater” with homes worth less than the mortgage debt they owed. As part of the scheme, Jimenez, Polanco, Ricci, Bellerose and others submitted materially false and misleading documents to numerous banks in an effort to induce them to permit the short-sales, thereby releasing the purported sellers from their unpaid mortgage debts, while simultaneously inducing the purported buyers’ banks to provide financing for the deals. In fact, the purported sellers simply stayed in their homes, with their debt substantially reduced.

The conspirators falsely led banks to believe that the sales were arms-length transactions between unrelated parties; in fact, the buyers and sellers were frequently related, and the sellers retained control of (and frequently continued to live in) the properties after the sale. The conspirators also submitted phony earnings statements in support of loan applications that were submitted to banks in order to obtain new financing for the purported sales. In addition, the defendants submitted phony “HUD-1 Settlement Statements” to banks that did not accurately reflect the disbursement of funds in the transactions. (HUD-1 Settlement Statements are standard forms that are used to document the flow of funds in real estate transactions. They are required for all transactions involving federally related mortgage loans, including all mortgages insured by the Federal Housing Administration.)

United States Attorney Andrew E. Lelling; Christina Scaringi, Special Agent in Charge of the Department of Housing and Urban Development, Office of Inspector General, New York Field Office; and Christy Goldsmith Romero, Special Inspector General of the Troubled Asset Relief Program, made the announcement.  Assistant U.S. Attorney Stephen E. Frank, Chief of Lelling’s Economic Crimes Unit, and Assistant U.S. Attorneys Sara Miron Bloom and Victor A. Wild, also of the Economic Crimes Unit, prosecuted the cases.

Gary P. DeCicco, 59, Nahant, Massachusetts, and Pamela M. Avedisian, 54, Nahant, Massachusetts, were charged in an indictment with one count of conspiracy to commit wire fraud and one count of wire fraud in connection with the “short sale” of a house in Nahant, Massachusetts. DeCicco was also charged with one count of conspiracy to commit bank fraud, one count of bank fraud, four counts of wire fraud and attempted wire fraud, and six counts of engaging in unlawful monetary transactions.

DeCicco has been in federal custody since he was charged in March 2017 with attempted extortion in connection with arranging and paying for a local business owner to be assaulted. DeCicco and Avedisian made an initial appearance in federal court in Boston and will be arraigned on Tuesday, January 16, 2018.

The indictment alleges that Avedisian owned a property in Nahant that was subject to a mortgage in excess of $1 million.  In October 2015, DeCicco and Avedisian allegedly conspired to defraud the mortgage holder by proposing the sale of the property for significantly less than the outstanding mortgage, in what is commonly referred to as a “short sale.”  By their very nature, short sales are intended to be arms-length transactions in which the buyers and sellers are unrelated and act independently, allowing sellers to cede their ownership of the property in exchange for the short-selling bank’s agreement to release them from their unpaid mortgage debt.  In order to get approval for the sale, DeCicco and Avedisian concealed their long-term romantic and business relationships from the loan servicing company and falsely represented that Avedisian could no longer make payments towards the mortgage on the property.  In fact, just two months before the “short sale” closed, Avedisian purportedly received $3.5 million from the sale of another asset to DeCicco.

The indictment also alleges that from November 2015 to September 2016, DeCicco and a co-conspirator falsified rent rolls and prepared fake leases, which they then provided to financial institutions in support of their applications for a $5.5 million loan secured by a commercial building in Peabody.  The indictment further alleges that between September 2016 and January 2017, DeCicco committed unlawful monetary transactions with the proceeds of the bank fraud scheme, and between February and December 2016, DeCicco engaged in a scheme to defraud multiple insurance companies using fake invoices and other documents to support his claims.

The charges of wire fraud and conspiracy, as well as bank fraud and conspiracy, provides for a sentence of no greater than 30 years in prison, three years of supervised release and a fine of $250,000.  The charges of wire fraud and attempted wire fraud provides for a sentence of no greater than 20 years in prison, three years of supervised release and a fine of $250,000.  The charge of engaging in unlawful monetary transactions provides for a sentence of no greater than 10 years in prison, three years of supervised release and a fine of $250,000.

United States Attorney Andrew E. Lelling; Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; and Joel P. Garland, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston, made the announcement today.  Assistant U.S. Attorney Kristina E. Barclay of Lelling’s Public Corruption and Special Prosecutions Unit is prosecuting the case.

 

Robert Pena, 68, Falmouth, Massachusetts, pled guilty in federal court in Boston in connection with defrauding the Government National Mortgage Association (Ginnie Mae) out of approximately $2.5 million. Pena pleaded guilty to one count of conspiracy and six counts of wire fraud.  U.S. Senior District Court Judge Mark L. Wolf scheduled sentencing for January 5, 2018.

Pena was president and founder of the now-defunct mortgage company, Mortgage Security Inc. (MSI), which contracted with Ginnie Mae to pool eligible residential mortgage loans and then sell Ginnie Mae-backed mortgage bonds to investors.  MSI was responsible for servicing the loans in the pools it created, including collecting principal and interest payments from borrowers, as well as loan payoffs, and placing those funds into accounts held in trust by Ginnie Mae, which would ultimately pass them along to investors.  Among other things, Ginnie Mae required issuers like MSI to provide regular reports concerning the status of the loans in the pools.

Beginning in 2011, Pena began diverting money that borrowers were sending to MSI.  Specifically, Pena deposited high-dollar, loan-payoff checks into bank accounts unknown to Ginnie Mae and then used those funds for personal and business expenses.  Pena also diverted borrowers’ escrow funds and mortgage-insurance premiums for his own use.  In total, Pena took approximately $2.5 million, which Ginnie Mae then had to pay to the investors whose investments it had guaranteed.  Pena also attempted to cover up his scheme by providing false reports to Ginnie Mae about the status of the loans MSI was servicing.

The charging statues provide for a sentence of no greater than 20 years in prison, three years of supervised release and a fine of $250,000 or twice the gross gain or loss.

Acting United States Attorney William D. Weinreb; Christina Scaringi, Special Agent in Charge of the U.S. Department of Housing and Urban Development, Office of Inspector General, Northeast Regional Office; and Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division, made the announcement.  Valuable assistance was provided by the U.S. Department of Veterans Affairs, Office of Inspector General; the U.S. Department of Agriculture, Office of Inspector General; and the Falmouth Police Department.  Assistant U.S. Attorney Brian LaMacchia of Weinreb’s Civil Division is prosecuting the case.

Jasmin Polanco, 37, Methuen, Massachusetts, a real estate closing attorney, and Vanessa Ricci, 40, Methuen, Massachusetts. a mortgage loan officer, each pleaded guilty to one count of conspiracy to commit bank fraud in connection with a sweeping conspiracy to defraud banks and mortgage companies by engaging in sham “short” sales of residential properties in Merrimack Valley, Massachusetts.

Separately, a real estate broker from Methuen, Greisy Jimenez, 49, Methuen, Massachusetts, was indicted on two counts of bank fraud and one count of conspiracy to commit bank fraud in connection with the same alleged scheme. In addition, U.S. District Court Judge Rya W. Zobel sentenced Hyacinth Bellerose, 51, a real estate closing attorney from Dunstable, Massachusetts, to time served and one year of supervised release to be served in home detention after pleading guilty to participating in the same conspiracy.

The charges arise out of an alleged scheme to defraud various banks via bogus short sales of homes in Haverhill, Lawrence and Methuen, Massachusetts, in which the purported sellers remained in their homes, with their debt substantially reduced.

The alleged conspiracy began in approximately August 2007 and continued through June 2010, a period that included the height of the financial crisis and its aftermath. Home values in Massachusetts and across the nation declined precipitously, and many homeowners found themselves suddenly “underwater” with homes worth less than the mortgage debt they owed. As part of the alleged scheme, Jimenez, Polanco, Ricci, Bellerose and others submitted materially false and misleading documents to numerous banks in an effort to induce them to permit the short-sales, thereby releasing the purported sellers from their unpaid mortgage debts, while simultaneously inducing the purported buyers’ banks to provide financing for the deals. In fact, the purported sellers simply stayed in their homes, with their debt substantially reduced.

The charging documents allege that as part of the conspiracy:

The conspirators falsely led banks to believe that the sales were arms-length transactions between unrelated parties, when in fact, the transactions were not arms-length; the buyers and sellers were frequently related, and the sellers retained control of (and frequently continued to live in) the properties after the sale;

The conspirators submitted phony earnings statements in support of loan applications that they submitted to banks in order to obtain financing for the purported sales; and

The conspirators submitted phony “HUD-1 Settlement Statements” to banks that did not accurately reflect the disbursement of funds in the transactions.

The charge of bank fraud and conspiracy to commit bank fraud provides for a sentence of no greater than 30 years in prison and a fine of $1 million.

U.S. District Court Senior Judge Douglas P. Woodlock scheduled Ricci’s sentencing for June 22, 2017. Polanco’s sentencing hearing has not yet been scheduled.

Acting United States Attorney William D. Weinreb; Christina Scaringi, Special Agent in Charge of the Department of Housing and Urban Development, Office of Inspector General, New York Field Office; and Christy Goldsmith Romero, Special Inspector General of the Troubled Asset Relief Program, made the announcement. Assistant U.S. Attorney Stephen E. Frank, Deputy Chief of Weinreb’s Economic Crimes Unit is prosecuting the cases.

Denise Bruce, 56, Hingham, Massachusetts, was sentenced  for defrauding mortgage companies in connection with multiple mortgages she obtained on a single residence.  U.S. District Court Senior Judge Douglas P. Woodlock imposed the sentence of two years in prison, five years of supervised release and restitution of $2,810,497.  In May 2016, Bruce pleaded guilty to five counts of bank fraud.

Between 2004 and 2008, Bruce fraudulently obtained five mortgage loans from different banks in amounts ranging from $325,000 to $487,500 on her Hingham property by submitting false information regarding her employment history, income, assets, and debt.  Bruce also filed fraudulent discharges of mortgages with the Plymouth County Registry of Deeds to create the appearance that earlier loans had been paid in full, when in fact, none of the loans had been paid.  In total, Bruce obtained $2,129,000 in proceeds from her fraudulent loans.

United States Attorney Carmen M. Ortiz; Steven Perez, Special Agent in Charge of the Federal Housing Finance Agency, Office of Inspector General, Northeast Region; and Christy Goldsmith Romero, Special Inspector General for the Office of the Special Inspector General for the Troubled Asset Relief Program, made the announcement.  The case was prosecuted by Assistant U.S. Attorney Victor A. Wild of Ortiz’s Economic Crimes Unit.

Suffolk County prosecutors are working with the state attorney general’s office as it investigates a Roxbury real estate dealer and two of his sons who are at the center of allegations of fraud and forgery involving numerous properties, according to a spokesman for the district attorney’s office.

Source: District attorney, AG investigate Roxbury real estate dealer – The Boston Globe