Archives For occupancy fraud

Sergey Shchirskiy, 41, Sacramento, California, was sentenced to seven years and 10 months in prison for his participation in two mortgage fraud schemes and one tax fraud scheme.

According to court documents, Shchirskiy pleaded guilty to one count of wire fraud in each of the two mortgage fraud cases, as well as one count of conspiracy to defraud the United States and one count of aggravated identity theft in the third tax fraud case.

According to the plea agreement, Shchirskiy was a loan processor in one mortgage fraud scheme (2:11-cr-514). Between April 2007 and November 2007, the co-conspirators used straw buyers to buy properties and then take out Home Equity Lines of Credit on the houses using fraudulent documents and statements. Shchirskiy helped to create the fraudulent supporting documents. All of the properties were foreclosed on, resulting in at least $1.5 million in losses to lenders.

According to the plea agreement in the second mortgage fraud scheme (2:12-cr-060), in April 2007, Shchirskiy recruited straw buyers to purchase a houses based on fraudulent loan applications. The applications gave false information about the buyer’s employment, income, assets, and intention to occupy the properties. The properties were foreclosed upon and resulted in a loss of more than $1.2 million to lenders.

According to the plea agreement in the tax fraud scheme (2:14-cr-198), between March 2011 and April 2011, Shchirskiy conspired with others to obtain false tax refunds by submitting fraudulent claims using the identities of various individuals, at least eight of which were stolen. Shchirskiy claimed Earned Income Tax Credit based on false claims of employment from California’s In-Home Supportive Services program. Shchirskiy and his co-conspirators made approximately 80 attempts to file fraudulent tax returns, attempting to receive $661,286 in fraudulent returns from the Internal Revenue Service. The IRS ultimately issued approximately $88,728 in fraudulent refunds.

U.S. Attorney Phillip A. Talbert announced the sentenced and U.S. District Judge Troy L. Nunley presided.  The cases were the product of investigations by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation. Assistant U.S. Attorneys Heiko Coppola and Michele Beckwith prosecuted the cases.

Lurlyn A. Winchester, 58, New City, New York, a Justice for the Town Court of Monroe, was charged with making false statements in connection with an application for a loan to purchase a residence in Monroe, New York, which satisfied the residency requirement of her position as Town Justice. She was also charged with obstruction of justice for providing law enforcement officers, who questioned her about her mortgage loan, with false documents, including fabricated rent payment receipts. Winchester was arrested at her home in New City, New York, and was presented before U.S. Magistrate Judge Lisa Margaret Smith in White Plains federal court.

According to the allegations contained in the Complaint:

In or about 1997, Winchester  and her husband purchased a home in New City, New York (the “New City Home”), which they continue to own. On or about October 6, 2013, Winchester, an attorney practicing in New City, was nominated to be the democratic candidate for Town of Monroe Justice. At that time, she provided an address in Monroe, New York (“Monroe Residence-1”), as her residence, and on or about October 7, 2013, she registered to vote in Monroe, New York. Winchester was then elected Town of Monroe Justice on or about November 5, 2013.

On or about October 14, 2014, Hudson United Mortgage, LLC (“Hudson United”), a mortgage broker located in New City, New York, received a letter from Winchesterindicating that she had been elected Town Justice for the Town of Monroe and that she was relocating to Monroe in order to comply with a residency requirement attached to that position. In or about December 2014, the defendant and her husband submitted an application for a residential loan to Hudson United, and indicated that the loan was to be used to purchase a condominium located in Monroe, New York (“Monroe Residence-2”). On both the loan application and a disclosure notice, signed by the defendant and her husband, they asserted that Monroe Residence-2 would be their primary residence.

Winchester also represented to Hudson United that she and her husband were going to rent out their New City Home to a tenant. Specifically, on or about February 6, 2015, Hudson United received a letter from the defendant in which she identified the New City Home as her “current primary residence” and she stated that she and her husband intended to rent the New City Home and they “already had a prospective tenant” who was “anxiously awaiting to take occupancy of the residence.”

In or about March 2015, Winchester learned that the ultimate loan issuer, Plaza Home Mortgage Inc. (“Plaza”), was going to decline to issue the loan due to insufficient income. In response, Winchester again represented that she and her husband were going to rent out the New City Home and indicated they would have rental income of $4,500 a month. Plaza requested copies of a fully executed 12-month lease and a canceled check for a security deposit. Winchester provided a copy of a lease agreement, signed by the defendant, her husband, and a tenant (the “Tenant”). She also submitted a copy of two $4,500 checks for the security deposit and one month’s rent, made out to the defendant, and drawn on the Tenant’s bank account, as well as other documents reflecting that the checks were deposited into Winchester’s bank account. In or about April 2015, Plaza issued the loan.

Contrary to the defendant’s representations, Winchester did not intend to and did not lease the New City Home to Tenant in 2015; instead she fabricated a 2015 lease and caused checks to be issued and deposited to make it falsely appear that Tenant had paid rent and a security deposit. Tenant did not sign a lease in March 2015, never moved in to the New City Home, and Winchester provided the $9,000 that covered the two $4,500 checks purportedly provided by Tenant.

Further, Monroe Residence-2 was not intended to be, and has not been, the primary residence of the defendant and her husband. Interviews with neighbors, cellphone records, and credit card records indicate that Winchester did not move to Monroe. Finally, in a statement to agents, Winchester admitted that: she resided at the New City Home, she had informed Hudson United that she would be renting the New City Home, she submitted rental checks and other documents relating to renting the New City Home, and the Tenant never moved into the New City Home.

With respect to the obstruction charge, during an interview with members of the FBI Task Force relating to Winchester’s statements and submissions in connection with her loan, she provided them with, among other things, purported receipts for rent payments she claimed to have received from the Tenant for rent of the New City Home. The Tenant, however, indicated that he did not know anything about the receipts and never gave Winchester the cash payments supposedly memorialized in them.

Winchester was charged with one count of making false statements to a mortgage lending business, which carries a maximum sentence of 30 years in prison, as well as falsifying records in a federal investigation, with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of a federal department or agency, which carries a maximum sentence of 20 years in prison.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the Complaint.

Acting Manhattan U.S. Attorney Joon H. Kim said: “As alleged, Lurlyn Winchester, a municipal court judge for the Town of Monroe, lied and provided fake documents to secure a mortgage on a Monroe condominium in an attempt to falsely satisfy the judicial residency requirement. We should expect and demand integrity in our government. This Office is committed to pursuing corruption in all forms and in all three branches of government, including the judiciary. I thank our partners at the FBI for their work in exposing this fraud and holding accountable our public officials.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. stated: “As alleged, Lurlyn Winchester falsely represented her primary residence in order to fulfill requirements for her position as justice for the Town of Monroe. Winchester, who claimed she had relocated her primary residence from New City to Monroe, allegedly remained in her New City home, despite representations to the contrary. She allegedly provided false information to her mortgage company, claiming her New City property was being rented to a prospective tenant, and later lied to federal agents who interviewed her about her claims. If anyone should have respect for the rule of law, it should most certainly be those entrusted to uphold it. Many thanks to our partners in this investigation as we continue to reinforce our commitment to uncover illegal activity on behalf of public officials at every level.”

Mr. Kim praised the outstanding investigative work of the FBI. He also thanked the Orange County Sheriff’s Office and the Orange County District Attorney’s Office for their assistance.

The case is being prosecuted by the Office’s White Plains Division. Assistant U.S. Attorney Margery B. Feinzig is in charge of the prosecution.

Sam Tuttle, a vice-president and loan officer at PC Bank Home Loans, Ben Leske, a loan officer at PC Bank Home Loans, Angela Crozier, a senior loan processor at PC Bank Home Loans, and Ed Rounds, a loan officer at PC Bank Home Loans, were indicted by a grand jury in the U.S. District Court for the Western District of Washington at Tacoma and charged with conspiracy to make false statements on loan applications and to commit bank fraud and bank fraud, .

According to the indictment, from 2004 through 2008, Tuttle, Leske, Crozier and Rounds, along with Shawn Portmann, a vice-president and loan officer at PC Bank Home Loans, Craig Meyer, a vice-president and loan officer at PC Bank Home Loans, and Alice Barney, Portmann’s personal assistant, and other co-conspirators, knowingly made false statements and willfully overvalued property for the purpose of influencing the actions of Pierce Commercial Bank and other federally insured financial institutions, in connection with applications for mortgage loans.  PC Bank Home Loans was a mortgage lending office of Pierce Commercial Bank. During the time they were employed at PC Bank Home Loans, the alleged conspirators originated in excess of 5,000 mortgage loans representing in excess of $1 billion in loan proceeds. The loans detailed in the indictment are alleged to have contributed to the failure of Pierce Commercial Bank.

The indictment alleges that the conspirators solicited individuals, including through mass marketing, who were seeking to purchase homes.  They were solicited to prepare and submit mortgage loan applications regardless of whether they might qualify for the loans. The co-conspirators caused loan applications to be prepared based upon fraudulent representations related to gross monthly income, employment status, rental status, assets and liabilities and whether the property would be used as a primary residence.  Sometimes the false statements were made with the knowledge of the borrowers and in other cases, the borrowers did not know the false statements were being inserted. If the borrowers did not qualify, co-conspirators would, at times, seek the assistance of Portmann and other co-conspirators for advice on how to falsely modify the loan applications to ensure they passed underwriting.  Among the assistance provided by Portmann was the use of his assistant, Barney, to provide a Verification of Rent form for inclusion in the loan package, that falsely asserted the borrower was paying rent for an apartment owned by Portmann when, in fact, the borrower was not residing in, and had never resided in, the apartment.

The indictment further alleges that the co-conspirators would collude with third parties, including appraisers, to ensure the loans successfully closed.  The co-conspirators would pressure appraisers to generate specific values, even when told that the values were not supported by appraisal methods.

The indictment also alleges that when there were defaults on loans that were sold into the secondary market, the co-conspirators would take steps to ensure that Pierce Commercial Bank and the secondary investors did not discovery the underlying fraudulent statements.  The efforts included Portmann, Tuttle and Meyer forming a separate company to buy defaulted loans back from secondary investors so that no further investigation would be done on the defaulted loans.

According to the indictment, the fraudulent scheme caused in excess of $9.5 million in losses to Pierce Commercial Bank, secondary investors and HUD/FHA.

Ross D. Pickard, 63, Naples, Florida, was indicted and charged with one count of conspiracy and three counts of loan and credit application fraud.

According to the indictment, Pickard was a senior loan officer at JP Morgan Chase Bank. He conspired with others in a scheme to defraud the bank by completing, certifying, and submitting mortgage loan applications on behalf of borrowers that contained false and fraudulent statements. The false statements included, but were not limited to, false occupancy, overinflated income and assets, as well as the understated liabilities. By relying on Pickard’s false and fraudulent statements on the loan applications, JP Morgan Chase was induced into funding mortgage loans for otherwise unqualified borrowers.

If convicted, he faces up to 5 years in federal prison for the conspiracy count and up to 30 years on each of the fraud counts. The indictment also notifies him that the United States is seeking a money judgment for the proceeds of the charged criminal conduct.

United States Attorney A. Lee Bentley, III announced the indictment.  The case was investigated by the Federal Housing Finance Agency – Office of Inspector General and the Internal Revenue Service – Criminal Investigations Division. It will be prosecuted by Special Assistant United States Attorney Chris Poor.

Orlando Ortiz, 53, Luis Enrique Tur, 47, Jeffrey Todd Canfield, 49, Rafael Amador, 34, Osvaldo Sanchez, 40, Mirna Pena, 54, and Pedro Reynaldo Allende, 66,all residents of Miami-Dade County, Florida, pled guilty to one count of conspiracy to commit bank fraud and wire fraud affecting a financial institution. Ortiz, Tur, Canfield, Amador, and Sanchez  are scheduled to be sentenced on January 19, 2017. Pena and Allende are scheduled to be sentenced on March 28, 2017.

The charges arise from the involvement of the defendants in a complex mortgage fraud scheme involving two condominium conversion projects in central Florida.

According to court documents, including the agreed upon factual statements:

In 2007 and 2008, Ortiz, Tur, Canfield, Amador, and Sanchez participated in a mortgage fraud scheme involving two condominium projects: “Portofino at Largo,” in Largo, Florida, and “Bayshore Landing,” in Tampa, Florida.  Pena and Allende were involved in the same mortgage fraud scheme; however, their involvement was limited to units in the Portofino at Largo project.

During the course of the conspiracy, Pena, Allende, and other individuals recruited straw buyers and unqualified buyers, including Ortiz, Tur, and Canfield, to purchase units in the two condominium projects.  Among other things, the recruiters told certain prospective buyers that: buyers did not have to contribute any money to purchase a unit; buyers would receive a cash-back incentive or “kick-back” after closing; and buyers would receive several months’ mortgage payments.

The co-conspirators prepared and submitted false and fraudulent mortgage loan applications and related documents to various lenders including Bank of America, BankUnited, Chase Bank USA, CitiMortgage, First National Bank of Arizona, IndyMac Bank, JPMorgan Chase Bank, and Washington Mutual Bank.  Among other things, the loan applications and related documents contained false and fraudulent statements and omissions regarding: the borrower’s intention to reside in the unit; the borrower’s employment and income; the borrower’s assets and liabilities; the borrower’s payment of an earnest money deposit and cash-to-close; and the use of mortgage loan proceeds to pay “marketing fees” to various “marketing companies.”  In truth and in fact, the marketing companies were fraudulent businesses that did not provide any marketing services.  Instead, the “fraudulently induced marketing fees” were a means of diverting proceeds from the fraud scheme to the marketing companies.  The fraudulent marketing companies would then use the fraud proceeds to pay undisclosed kick-backs to the buyers.

Pena and Allende operated two Miami-based businesses, which were used to perpetrate the mortgage fraud scheme: Mortgage Bankers Lenders, Inc., a mortgage broker business, which submitted false and fraudulent loan applications and related documents to the lenders; and United Title Services & Escrow, Inc., which closed mortgage loan transactions even though the buyers had not paid earnest money deposits or cash-to-close, and used loan proceeds to pay “marketing fees” to a marketing company operated by unindicted co-conspirators.

Ortiz, Canfield, and Tur purchased units in Portofino at Largo.  Tur also purchased units in Bayshore Landing.  Ortiz, Canfield, and Tur engaged a Miami-based mortgage broker business operated by an unindicted co-conspirator to prepare and submit mortgage loan applications for their units.  On their behalf, the co-conspirator prepared and submitted fraudulent loan applications and other documents to various lenders.  The fraudulent loan documents included fabricated W-2 Wage and Tax Statements and pay stubs.  After closing on their units, Ortiz, Canfield, and Tur received substantial undisclosed kick-backs from a marketing company operated by an unindicted co-conspirator.  The kick-backs were funded with fraud proceeds, which had been paid to the marketing company as “marketing fees.”

Amador and Sanchez operated Allegiance Title of America, Inc., which served as the closing agent for mortgage loans involving condominium units in Portofino at Largo and Bayshore Landing.  Among other things, Amador and Sanchez caused Allegiance Title of America to disburse loan proceeds even though the buyers had not paid the earnest money deposits or cash to close, that was required by their loan applications and settlement statements.  Amador and Sanchez also caused Allegiance Title of America to pay fraudulent “marketing fees” to marketing companies.

The defendants face a maximum statutory term of thirty years’ imprisonment for their participation in the mortgage fraud conspiracy.

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, Timothy Mowery, Special Agent in Charge, Federal Housing Finance Agency, Office of Inspector General (FHFA-OIG), George L. Piro, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office, and Juan J. Perez, Director, Miami-Dade Police Department (MDPD), made the announcement.

Mr. Ferrer commended the investigative efforts of the FHFA-OIG, FBI and MDPD.  Both cases are being prosecuted by Assistant United States Attorney Dwayne E. Williams.

 

Jamie Hollingsworth and Chris Young were indicted in the United States District Court for the District of South Carolina and charged with conspiracy to make false statements on loan applications. The indictment also seeks forfeiture.

According to the indictment:

Hollingsworth, a real estate agent, decided to purchase three separate residential properties on the Isle of Palms, South Carolina.  Young, a mortgage broker and originator, agreed to obtain financing for the purchases.

Hollingsworth falsely stated on the loan application for one of the properties that he intended to use it as his primary residence.  Young falsely stated on the other two applications that Hollingsworth intended to use those properties as his primary residence. They knew these statements were false.

Hollingsworth obtained a first and second mortgage for each of the properties, which Young originated.  Despite the fact that the properties were purchased all at once, Hollingsworth and Young failed to disclosed to each of the financials institutions that Hollingsworth was purchasing two other residential properties at the same time. By failing to disclose the other purchases, they concealed Hollingsworth’s financial liabilities for the other concurrently closing loans.

Hollingsworth arranged for all three of the transactions to close simultaneously on the same day so the financial institutions would not be aware of the concurrent borrowing.  The loans were closed at different law firms.

Soon after closing, Hollingsworth was unable to sell the properties and defaulted on the loans, causing substantial losses to the financial institutions.

Alla Samchuk, 45, Roseville, California, was found guilty in a mortgage fraud scheme involving three properties after a four day jury trial in Sacramento, California.  Samchuk was convicted of six counts of bank fraud, six counts of making a false statement to a financial institution, one count of money laundering, and one count of aggravated identity theft. After the verdict, U.S. District Court Judge Garland E. Burrell Jr. ordered Samchuk taken into custody.

According to court documents, from 2006 through 2008, Samchuk, a licensed real estate salesperson, orchestrated a mortgage fraud scheme involving three properties in the Sacramento area using straw buyers. Two of the houses were purchased so that Samchuk herself could occupy them. She lacked the ability to qualify for a loan, so she instead recruited straw buyers to apply for the loans in their names. Samchuk caused the submission of loan applications containing false representations of income, employment, assets, and a false indication that the straw buyers would occupy the homes as their primary residence.

A second objective of the scheme was to obtain HELOC (home equity line of credit) funds. According to evidence at trial, on two of the properties, Samchuk diverted or attempted to divert HELOC funds to her own benefit. Samchuk caused the HELOC loans to fund by submitting false statements and documents to the lender regarding the qualifications of the straw buyers.

The scheme involved two properties in Roseville, California and one in El Dorado Hills, California. In 2007, Samchuk filed an application for a HELOC on one of the properties without the straw buyer’s knowledge or consent. To obtain the HELOC, she forged the signature of the straw buyer on a short form deed of trust that she caused to be notarized and recorded. The stated purpose of the HELOC was home improvement, but once the line of credit was funded, Samchuk quickly diverted all of the funds to her own use, spending the proceeds on a Lexus and the repayment of a substantial personal debt.

Sentencing is set for October 21, 2016. Samchuk faces a maximum of 30 years in prison for each count of bank fraud and false statements to a financial institution, 10 years in prison for money laundering, and two years in prison for aggravated identity theft.

The verdict was announced by Acting U.S. Attorney Phillip A. Talbert. This case is the product of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation. Assistant U.S. Attorneys Audrey B. Hemesath and Andre M. Espinosa are prosecuting the case.

I often see press releases that define straw buyers as individuals who did not intend to reside in property that they purchased.  I also receive many emails about these types of situations that conflate straw buyer fraud and occupancy fraud.

Straw buyer fraud is not differentiated by the intent to occupy.  I think that the confusion arises from the fact that straw buyer fraud almost always involves occupancy fraud.  But occupancy fraud is, by itself, mortgage fraud.  Straw buyer fraud has additional elements and is something else entirely.

In general, a straw buyer/borrower is a person who acts as the buyer in a real estate transaction but has no intention of  being financially responsible for the property. The most obvious example is where a person is paid to lend their identity and credit to a transaction.   So, for instance, let’s say that I cannot qualify to buy the $500,000 house I want because I have horrible credit and, while I technically make more money each month than the payment amount, I don’t make enough that my front-end and back-end ratios will allow me to qualify for a mortgage.  So, I agree to pay you $5,000 and you agree to act as the buyer of my dream home.  We apply for the mortgage in your name and use your social security and credit.  The application has all of your financial information on it and we don’t even bother to mention me to the lender at all.  At closing, you sign the promissory note and deed of trust or mortgage and other loan documents.  But, as soon as we walk out of the closing, you hand me the keys, we shake hands, and we go our own separate ways.  I move into the house and place my beautiful new blue sofa in front of the fireplace.  I make the payments every month.  I fix the roof when it needs repair.  I put a swing set in the backyard for my children.  Even though you have title to the house, I was always intended to be the real owner.

There are many variations on this scenario.  For instance, straw buyers are often used in real estate investment schemes.  There are underwriting limits on the number of residential mortgage a single person can have at one time – and there is also generally a point where the carrying costs on properties will cause an individual to lose their ability to qualify for additional mortgages.  If the scheme principals have maxed out their lending ability, they often use straw buyers so that they can extend that ability and purchase more homes.  Sometimes the straw purchasers are relatives or employees – but I have seen ads on Craig’s List looking for ‘investors’ who are paid up front, lend their credit and then allegedly have no further responsibility for the property – and, of course, no right to share in any profits when the property is sold.

Other times, straw buyers are parents that act as credit partners for their children – buying the house in their own names because their offspring cannot qualify – but with no intention of having the ultimate financial responsibility for the property.

There are as many colors of sofas are there are variations on the schemes.

And, unless the intended tenant of the property is the straw buyer (which I have personally never seen), straw buyer schemes always involve occupancy fraud.

Occupancy fraud is purchasing a property and representing to the lender that you will live in the property when you have no intention of living in the property.   You can lie about your intent to live in an investment property in order to get a better interest rate while still intending to own and be financially responsible for the property – you have committed occupancy fraud but not straw buyer fraud.  The majority of occupancy frauds do not involve straw buyers at all.  And, occupancy fraud is mortgage fraud all by itself, regardless of whether there is a straw buyer involved.

 

Felicia Muhammad, 45, Lakewood, California was found guilty of five felony charges for lying to banks that funded mortgages for three properties that later went into default, causing about $660,000 in losses to the lenders.  Muhammad was a licensed real estate broker living in Long Beach, California at the time of the conduct.  She was convicted of five counts of making false statements to federally-insured financial institutions, specifically U.S. Bank, Countrywide Bank, and First Horizon Home Loans (a subsidiary of First Tennessee Bank).

According to the evidence at trial, in the summer of 2008, Muhammad applied for three loans so she could purchase condominium units in North Hollywood, California, and Canoga Park, California. The total value of the loans was more than $1.1 million. Continue Reading…

Jeffrey T. Crothers, 50, Stockton, California, pleaded guilty to conspiracy to commit bank fraud.

According to court documents, Crothers, while working for National City Mortgage in Stockton, conspired with at least one other person to defraud National City Bank, which funded the mortgages. In 2006, Crothers submitted a loan application that falsely represented that the loan applicant was the actual borrower, that the loan applicant’s monthly income was higher than it actually was, and that the property being purchased was to be the loan applicant’s primary residence when it was not. The loan applicant was selected because of his good credit, but was unable to make the monthly payments for the loan.

Crothers also submitted a letter that contained a false explanation as to why the loan applicant was purchasing the property. The false letter was used to satisfy a condition for the issuance of the loan. National City Bank sustained a loss of approximately $87,000.

This case is the product of an investigation by the Federal Bureau of Investigation. Assistant United States Attorneys John K. Vincent and Christiaan H. Highsmith are prosecuting the case.  The plea was announced by United States Attorney Benjamin B. Wagner.

Crothers is scheduled to be sentenced by U.S. District Judge Garland E. Burrell Jr. on May 20, 2016. Crothers faces a maximum statutory penalty of five years in prison and a $250,000 fine.