Archives For Short Sale Fraud

Iskyo Aronov (also known as “Isaac Aronov”), 32, Miami, Florida, Michael Konstantinovskiy (also known as “Michael Kay”), 33, Rego Park, Queens, Tomer Dafna, 48, Great Neck, New York, Avraham Tarshish, 40, Queens Village, New York and Michael Herskowitz, 40, Brooklyn, New York have been indicted for conspiracy to commit wire fraud and bank fraud, and related wire fraud counts, in connection with a scheme to defraud mortgage lenders, including the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and borrowers.

According to the indictment, between December 2012 and January 2019, the defendants conspired to defraud mortgage lenders, misleading them into approving short sale transactions at fraudulently depressed prices.  In a short sale, with the approval of the mortgage lender or servicer, a mortgage loan borrower sells his or her property for less than the outstanding balance of the mortgage loan.  The proceeds from the short sale, less approved closing costs, are applied to the outstanding mortgage loan balance owed to the lender, who typically agrees to forgive the borrower’s remaining mortgage loan balance.  Here, the defendants fraudulently manipulated the short sale process by transferring properties for prices well above the short sale prices, and failing to disclose this to the mortgage lenders and servicers.  The defendants also took steps to preclude other prospective purchasers from making higher offers for properties by failing to market properties as required by the lenders, and by filing fraudulent liens on properties.

As a further part of the scheme, the defendants provided the mortgage lenders and servicers with false and misleading information in transaction documents and failed to disclose either payments made to the borrower and others related to short sale or contemporaneous agreements to transfer the properties at inflated prices.  Many of the affected mortgage loans were insured by the Federal Housing Administration, or owned or guaranteed by Fannie Mae or Freddie Mac.

Richard P. Donoghue, United States Attorney for the Eastern District of New York, Robert Manchak, Special Agent-in-Charge, Federal Housing Finance Agency, Office of Inspector General, Northeast Region (FHFA-OIG), and Christina Scaringi, Special Agent-in-Charge, U.S. Department of Housing and Urban Development, Office of the Inspector General, Northeast Region (HUD-OIG), announced the charges.

As alleged, the defendants defrauded mortgage loan holders out of millions of dollars, with taxpayers saddled with much of the loss,” stated United States Attorney Donoghue.  “This Office will continue working with our law enforcement partners to vigorously prosecute those who commit mortgage fraud and enrich themselves at the expense of the financial institutions and government programs that insure or guarantee the loans.”  Mr. Donoghue thanked the United States Department of Homeland Security, Homeland Security Investigations, New York Field Office (HSI), the HSI El Dorado Financial Crimes Task Force and the Internal Revenue Service, Criminal Investigation, New York, for their assistance in the ongoing investigation.

Together with our partners in law enforcement, we have disrupted a scheme to defraud Fannie Mae and Freddie Mac. As demonstrated by this indictment, FHFA-OIG will investigate and hold accountable those who seek to victimize the government-sponsored entities supervised and regulated by FHFA,” stated FHFA-OIG Special Agent-in-Charge Manchak.

These five individuals allegedly engaged in a scheme of wholesale deception when they provided false, misleading, and incomplete information to lending institutions, borrowers, and the Federal Housing Administration (FHA) causing millions of dollars in damages to the FHA, which typically results in higher premiums being charged to future first-time homeowners,” stated HUD-OIG Special Agent-in-Charge Scaringi.  “What makes their alleged crimes even more egregious was their artificial devaluation of properties that, when resold or ‘flipped,’ resulted in large profits.  Many of these homes were located in economically challenged areas of New York where affordable housing is at a premium.”

Konstantinovskiy, Dafna, Tarshish and Herskowitz were arrested this morning in New York, and will be arraigned this afternoon before United States Magistrate Judge Lois Bloom.  Aronov was arrested in Florida, and will appear this afternoon for a removal hearing at the federal courthouse in Miami.

The charges in the indictment are allegations, and the defendants are presumed innocent unless and until proven guilty.  If convicted, the defendants each face a maximum of 30 years’ imprisonment and a $1 million fine.

The case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorney Shannon C. Jones is in charge of the prosecution.  Assistant United States Attorney Tanisha Payne of the Office’s Civil Division is handling forfeiture matters.

George Bussanich Sr., 60, Park Ridge, New Jersey, today admitted his role in a scheme with his son to use straw buyers and short sales on properties to defraud mortgage lenders out of hundreds of thousands of dollars and to avoid paying taxes on the proceeds of the scheme.

Bussanich Sr. pleaded guilty before U.S. District Judge Claire C. Cecchi in Newark federal court to a superseding information charging him with one count of bank fraud conspiracy and one count of tax evasion. His son, George Bussanich Jr., 39, Upper Saddle River, New Jersey, pleaded guilty to tax evasion before Judge Cecchi in October 2017 and is scheduled to be sentenced September. 25, 2019.

According to documents filed in this case and statements made in court:

Between 2009 and 2012, Bussanich Sr. and Bussanich Jr. conspired to defraud mortgage lenders through the sham short sales of two properties located on Jefferson Avenue, Emerson, New Jersey, and Lillian Street, Park Ridge, New Jersey.

Bussanich Sr. controlled various purported medical clinics and surgical centers in New Jersey. He recruited his business partner and an employee from a sleep clinic in Cliffside Park, New Jersey, to pose as legitimate, unrelated buyers of the properties. In order to conceal his involvement, Bussanich Sr. used a business entity he controlled to fund each short sale transaction and the subsequent repurchase of those properties. Bussanich Jr., the owner of record of both properties, negotiated the short sales with the lenders using materially false information that misrepresented the circumstances of the short sales, the relationships of the parties, and the source of funding for the transactions.

Approximately two years after the fraudulent short sales, Bussanich Sr. bought the properties back from the straw purchasers using money that he owed his business partner from an earlier venture.

Bussanich Sr. also failed to disclose on his tax returns hundreds of thousands of dollars in income that he received from his purported medical clinics and surgical centers. He used those funds to purchase high-end luxury vehicles worth a total of over $300,000, including two Land Rover sport utility vehicles and a Ferrari Spyder. He also used those funds to purchase official bank checks to fund the fraudulent short sales.

The bank fraud conspiracy charge carries a maximum potential penalty of 30 years in prison and a maximum potential fine of $1 million. The tax evasion charge carries a maximum potential penalty of five years in prison and a maximum potential $250,000 fine. Sentencing is scheduled for Jan. 23, 2020.

U.S. Attorney Craig Carpenito made the announcement.

U.S. Attorney Carpenito credited special agents of the FBI, under the direction of Special Agent in Charge Gregory W. Ehrie in Newark, and special agents of IRS – Criminal Investigation, under the direction of Special Agent in Charge John R. Tafur, with the investigation leading to today’s guilty plea.

The government is represented by Assistant U.S. Attorney Ari B. Fontecchio of the Office’s Economic Crimes Unit, and Nicholas P. Grippo, Attorney in Charge of the Trenton Office.

Brannon Rue, real estate agent, 47, Oviedo, Florida, pleaded guilty to making a false statement to a financial institution. He faces a maximum penalty of 30 years in federal prison. A sentencing date has not yet been set.

According to the plea agreement, Rue executed a scheme to influence financial institutions to approve short sales of real estate at a loss by making false statements on various documents. In furtherance of his scheme, Rue formed and controlled Hatley Partners, which he used to mask his role as the true purchaser of short-sale properties and to profit from the subsequent sale of the properties. Continue Reading…

Anthony Garvin, 49, Jersey City, New Jersey was charged in a superseding indictment returned June 25, 2019 for his role in running a large-scale mortgage fraud scheme that involved properties in Jersey City, Union, and elsewhere in New Jersey and caused losses of millions of dollars.

According to the documents filed in this case:

From January 2011 through November 2017, Garvin and others engineered fraudulent short sale “flips” of various New Jersey properties with mortgages that were in default, and also fraudulently obtained numerous home equity lines of credit, or “HELOC” loans, using fraudulent documents and information.

The conspirators allegedly arranged simultaneous fraudulent transactions on the same target property. In the first transaction, which involved the sale by the current owner, the conspirators convinced the financial institution holding the mortgage to accept the sale of the target property at a loss, usually to a buyer who was secretly a conspirator or an entity controlled by the conspiracy.

In the second transaction, the conspirators flipped the same target property from the first buyer to a second buyer, who typically obtained a mortgage from another financial institution using false loan applications, pay stubs, bank account statements and title reports provided by members of the conspiracy. The second transaction frequently closed for significantly more or even double the price of the first transaction.

Garvin and others allegedly rigged the short sale process at each step to maximize the difference in price between the two transactions and keep the victim financial institutions from detecting the fraud. The conspirators used various kinds of phony documents and misrepresentations, including generating false pre-approval letters from a New Jersey corporation controlled by a conspirator and generating phony deeds that backdated the closing date of the first transactions.

To obtain HELOC loans, the conspirators allegedly submitted loan applications in the name of straw borrowers, who did not in fact reside at the subject properties, and used false and fraudulent information – including false pay stubs and tax information – to make it appear as though the straw borrowers made more money than they actually did. The conspirators frequently applied for multiple HELOC loans on the same property nearly contemporaneously, withholding from each lender the existence of other applications.

The conspirators then disbursed the funds received from financial institutions – which totaled millions of dollars – into various accounts they controlled to conceal their illegal activities and split the profits.

The count of conspiracy to commit bank fraud and each substantive count of bank fraud are each punishable by a maximum potential penalty of 30 years in prison and a $1 million fine.

Garvin was charged with one count of bank fraud conspiracy and five counts of bank fraud. Garvin was originally indicted on one count of bank fraud conspiracy and one count of bank fraud on January 11, 2019.

U.S. Attorney Craig Carpenito made the announcement today.

U.S. Attorney Carpenito credited special agents of the FBI, under the direction of Special Agent in Charge Gregory W. Ehrie in Newark, postal inspectors of the U.S. Postal Inspection Service, under the direction of Inspector in Charge James Buthorn, and special agents of the Federal Housing Finance Agency (FHFA) – Office of Inspector General, under the direction of Special Agent in Charge Steven Perez in Newark, with the investigation leading to the superseding indictment.

The government is represented by Assistant U.S. Attorneys David Feder and Zach Intrater of the U.S. Attorney’s Office in Newark.

The charges and allegations in the superseding indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

Defense counsel: Murdoch Walker II Esq., Atlanta, Georgia; Charles D. Dawkins Jr. Esq., Elizabeth, New Jersey.

 

Steve Young Kang, a/k/a “Steven Young Kang and “Young Tae Kang,” 64, Ridgefield, New Jersey, and Young Jin Son, a/k/a “Joshua Son,” 49, Norwood, New Jersey, pleaded guilty today for their respective roles in a scheme to defraud financial institutions and others.

According to documents filed in these cases and statements made in court:

Kang, Son and others fraudulently induced mortgage lenders to participate in “short sale” transactions. In a typical short sale transactions, a financial institution agrees to allow a house owner in financial distress to sell his or her home for less than they owe on their mortgages. Such transactions are called short sales because the market value of the house is less than the amount owed by the house owner and the lender agrees to accept a payment “short” of the amount owed by the house owner.

Kang, a real estate broker and agent, admitted to a scheme in which, from June 2013 to January 2017, he sold his own properties and recruited others to sell properties in short sales to a co-schemer, Mehdi Kassai, who was able to obtain the properties for substantially less than the properties were actually worth through false documents, straw buyers, cosmetic damage to properties, and restricting the ability of others to bid on and buy those properties. Kassai then sold many of those properties to third-parties at a substantial profit. Kang defrauded financial institutions and others of $2.7 million in this manner.

Son, a real estate broker and agent, admitted recruiting others to sell properties in short sales to Kassai, who obtained the properties for substantially less than they were actually worth through false documents, straw buyers, cosmetic damage to properties, and restricting the ability of others to bid and buy those properties. Kassai sold many of those properties to third-parties at a substantial profit. Son defrauded financial institutions and others of $1.9 million in this manner.

The bank fraud and wire fraud charges each carry a maximum potential statutory penalties of 30 years in prison and a $1 million fine. Kang and Son have both agreed to forfeit the proceeds of the scheme. Sentencing for both defendants is scheduled for Oct. 1, 2019. Kassai previously pleaded guilty to his role in the scheme and is awaiting sentencing.

U.S. Attorney Craig Carpenito made the announcement.

U.S. Attorney Carpenito credited the Bergen County Prosecutor’s Office, under the direction of Prosecutor Mark Musella; special agents of the Federal Housing Finance Agency, Office of Inspector General, under the direction of Special Agent in Charge, Robert Manchak; and special agents of the U.S. Department of Homeland Security Investigations, under the direction of Special Agent in Charge Brian Michael, with the investigation leading to the guilty pleas.

The government is represented by Senior Trial Counsel Andrew Leven of the Healthcare & Government Fraud Unit of the U.S. Attorney’s Office, District of New Jersey, and Special Assistant U.S. Attorneys Charlie Divine and Kevin Di Gregory of the Federal Housing Finance Agency, Office of Inspector General.

 

David John Dziedzic, 55, Scottsdale, Arizona, was sentenced on December 17, 2018 to 30 months’ imprisonment for his lead role in criminal activity related to the short sale of distressed mortgages, some of which were federally-insured.

Dziedzic operated the “Housing Angels” program through his company, Real Core Realty, LLC.  He aggressively marketed a program designed to help homeowners stay in their homes following a short sale, through an undisclosed sale-leaseback program with “angel” investors.   Through this program, he typically received commissions from both the buyer and the seller in a short sale transaction. Dziedzic also recorded false secondary liens on more than 100 short sale properties to induce banks holding primary mortgages to pay off the false secondary mortgages, resulting in more than $100,000 in illegal profits as a result of the scheme.

Dziedzic’s wife, Heather Hamilton Dziedzic, 43, pleaded guilty to a related misdemeanor charge, and was also sentenced for her role in the offense.  She will also surrender her real estate license.  She received a two-year term of probation and a deferred disposition on a felony securities charge, which may be dismissed upon successful completion of the probationary term.

Dziedzic had previously pleaded guilty to one count of communication of unregistered securities, and a separate count involving the failure to notify the Treasury Department of his collection of more than $10,000 in cash from a real estate customer.  

As part of the sentence, Dziedzic must give up his real estate license.  He paid $107,280 in restitution for the actual loss caused when 40 banks paid out on the false liens, and he was also ordered to pay a money judgment of $142,000 over time, in order to disgorge additional profits.  As part of the plea agreement, Dziedzic, a Canadian national who naturalized as a U.S. citizen during the investigation, agreed to cooperate in his denaturalization, because he had failed to disclose the existence of the investigation to U.S. Citizenship and Immigration Services during the naturalization process.

The investigation in this case was conducted by Internal Revenue Service – Criminal Investigation; the Department of Housing and Urban Development, Office of Inspector General; the Federal Housing Finance Agency, Office of Inspector General; and the Federal Bureau of Investigation. The prosecution was handled by Gary M. Restaino and Monica B. Klapper, Assistant U.S. Attorneys, District of Arizona, Phoenix.

 

Christopher Goodson, 45, Newark, New Jersey, an attorney,  admitted today to running a large-scale mortgage fraud scheme that involved properties in Jersey City, Clifton, Union, and elsewhere in New Jersey and caused losses of millions of dollars.

Goodson pleaded guilty before U.S. District Judge Katharine S. Hayden in Newark federal court to an information charging him with one count of conspiracy to commit bank fraud.

According to the documents filed in this case and statements made in court:

From January 2011 through August 2017, Goodson, his co-defendant, Anthony Garvin, and others engaged in a short sale mortgage fraud conspiracy targeting various New Jersey properties with mortgages that were in default.   http://www.mortgagefraudblog.com/?s=Christopher+Goodson

The conspirators arranged simultaneous fraudulent transactions on the same target property. In the first transaction, which involved the sale by the current owner, the conspirators convinced the financial institution holding the mortgage to accept the sale of the target property at a loss, usually to a buyer who was secretly a conspirator or an entity controlled by the conspiracy.

In the second transaction, the conspirators flipped the same target property from the first buyer to a second buyer, who typically obtained a mortgage from another financial institution using false loan applications, pay stubs, bank account statements and title reports provided by members of the conspiracy. As a result, the second transaction frequently closed for significantly more or even double the price of the first transaction.

Goodson admitted that he, Garvin, and others rigged the short sale process at each step in order to maximize the difference in price between the two transactions and keep the victim financial institutions from detecting the fraud.

For instance, Goodson concealed the fact that he played multiple roles in the short sale transactions, including allegedly generating false pre-approval letters from a New Jersey corporation he owned that purported to be a short-term lending company operating out of California. These letters were used to deceive banks into believing that the purchaser – typically a conspirator or entity controlled by Goodson – had the credit necessary for the transaction. Goodson also negotiated the fraudulent short sales with the banks, generated phony deeds that backdated the closing date of the first transactions, and even served as the closing attorney during some of the short sales.

Garvin was a real estate agent and investor who allegedly coordinated fraudulent transactions as part of the scheme. The charge against him remains pending; he is considered innocent unless and until proven guilty.

The conspirators disbursed the funds into various accounts they controlled to conceal their illegal activities and split the profits. In total, the conspiracy defrauded financial institutions out of millions of dollars.

The conspiracy to commit bank fraud count is punishable by a maximum potential penalty of 30 years in prison and a $1 million fine. Sentencing is scheduled for January 29, 2019.

U.S. Attorney Craig Carpenito made the announcement.

U.S. Attorney Carpenito credited special agents of the FBI, under the direction of Special Agent in Charge Gregory Ehrie in Newark, postal inspectors of the U.S. Postal Inspection Service, under the direction of Inspector in Charge James V. Buthorn, and special agents of the Federal Housing Finance Agency (FHFA) – Office of Inspector General, under the direction of Special Agent in Charge Steven Perez in Newark, with the investigation

The government is represented by Assistant U.S. Attorneys David Feder and Zach Intrater, Executive Assistant to the U.S. Attorney, in Newark.

Defense counsel: John C. Whipple Esq., Morristown, New Jersey

 

Hasan Hussain, 57, Princeton, New Jersey, who was previously convicted in federal court and incarcerated for masterminding a real estate fraud scheme, pleaded guilty on Friday to charges that he again conspired to defraud financially distressed homeowners, investors, and financial institutions of fees, rental income, mortgage payment funds, property ownership and/or proceeds from the sale of their properties.

At the time of his guilty plea to the most recent federal indictment, Hussain admitted to using various business entities to trick distressed property owners, who were seeking loan modifications, into paying him fees, moving out of their homes, and selling their homes in short sale transactions.  As part of the plea, Hussain further admitted that he convinced lenders to agree to artificially low sale prices for the distressed property owners’ homes by directing other individuals to damage the properties prior to the short sales. Thereby, Hussain, or individuals or businesses associated with him, acquired the properties at reduced prices, and then flipped them to investors at much higher prices.  During his change of plea, Hussain admitted that these investors were defrauded of their funds, or good credit, or both when they agreed to purchase properties from Hussain.

Hussain further admitted that he assisted investors to acquire federally backed mortgages through fraudulent applications, ultimately resulting in losses to the lenders or the Federal Housing Administration.  Some of the tactics employed by Hussain as part of the scheme included misuse of identities and cutting and pasting signatures on property deeds and financial documents.

As part of his plea agreement, Hussain admitted that his scheme resulted in losses between $550,000 and $1.5 million dollars; that ten or more victims were harmed; and that at least some of his victims were particularly vulnerable, as a result of their personal situation.  The plea agreement also provided that the government would seek a leadership enhancement for Hussain given the extensive nature of the scheme and his role in it.

Hussain also pled guilty to aggravated identity theft in connection with the scheme.

At sentencing on January 8, 2018, Hussain faces up to 32 years in federal prison, 5 years of supervised release, and a fine of $1,250,000.

A co-defendant in this matter, Ricardo Abreu, who pled guilty earlier this year is scheduled to be sentenced on October 30, 2018.

Hussain’s guilty plea before U.S. District Court Judge John J. McConnell, Jr., is announced by United States Attorney Stephen G. Dambruch; Christina D. Scaringi, Special Agent in Charge of the Northeast Region of the U.S. Department of Housing and Urban Development Office of Inspector General; Brian Deck, Resident Agent in Charge of the Providence Office of the U.S. Secret Service; Harold H. Shaw, Special Agent in Charge of the Boston Division of the FBI; and Colonel Ann C. Assumpico, Superintendent of the Rhode Island State Police.

The case is being prosecuted by Assistant U.S. Attorneys Sandra R. Hebert and Richard B. Myrus.

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.

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.