Archives For Short Sale Fraud

Osbado Hernandez, 52, Avenel, New Jersey, a former Hudson County Sheriff’s officer, was charged for making false statements to a bank in connection with an application to discharge a mortgage through a fraudulent short sale.

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

From September 2015 to Dec. 30, 2015, in order to induce a bank to discharge a mortgage on a property in Keansburg, New Jersey, Hernandez made false statements in connection with a fraudulent short sale of the property, including that he did not have any money to apply toward his mortgage delinquency and that he intended to vacate the property following the short sale. Hernandez fraudulently withheld information regarding the availability of funds in a savings account he failed to disclose to the bank. Hernandez also signed a sworn affidavit that he would not stay in the property for more than 90 days following the short sale, even though he intended to, and did, continue living at the property. As a result of the fraudulent short sale, the bank discharged over $98,000 of debt against Hernandez.

The false statements charge is punishable by a maximum potential penalty of 30 years in prison and a maximum fine of up to $1 million.

Hernandez appeared this afternoon via videoconference before U.S. Magistrate Judge Jessica S. Allen in Newark federal court and was released on $100,000 unsecured bond.

Acting U.S. Attorney Rachael A. Honig made the announcement.

Acting U.S. Attorney Honig credited special agents with the U.S. Attorney’s Office, under the direction of Special Agent in Charge Thomas Mahoney, and special agents with IRS – Criminal Investigation, under the direction of Special Agent in Charge Michael Montanez, with the investigation leading to the charge.

The government is represented by Assistant U.S. Attorney Elaine K. Lou of the Special Prosecutions Division in Newark.

The charge and allegations contained in the complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

 

David Litman, 41, the village of Foosland, Illinois, has been ordered to report to federal prison to begin serving a two-year sentence for conspiracy to commit bank fraud and bank fraud in connection with a real estate short-sale scheme.

On Dec. 17, 2019, Litman pleaded guilty to conspiring with others, between 2008 and 2010, to defraud lending institutions in a series of short-sale transactions. Specifically, Litman caused false broker price opinions undervaluing residential properties to be submitted to financial institutions holding the mortgages of the properties, which he intended to purchase via a short sale. Litman submitted additional false documents to the financial institutions to induce them to approve requested short sales, including falsified listing agreements and proof-of-funds letters. The financial institutions, relying on the false broker price opinions, false real estate commission expenses, false listing agreements, and other false documentation, approved short sales of properties to Litman for payments that were less than they otherwise would have been likely to receive.

In addition, Litman caused the recording of false expenses, including false real estate commissions, on HUD-1 settlement statements documenting the short sales into which he entered. Litman also attempted to conceal certain of these false real estate commission expenses through the late issuance of commission checks.

Following the March 10, 2021, sentencing, U.S. District Judge James E. Shadid further ordered Litman to pay $279,900 in restitution and to serve two years on supervised release upon completion of his prison term.

The defendant’s repeated acts of fraud over several years caused lending institutions to lose a significant amount of money,” stated Acting U.S. Attorney Doug Quivey. “The defendant’s participation in the scheme thwarted the lenders’ ability to accurately value the homes involved and prevented them from recouping a greater portion of their losses on the homeowners’ mortgages. Fraud in any part of the mortgage industry ultimately costs both lenders and borrowers and can’t be tolerated.”

Assistant U.S. Attorneys Katherine V. Boyle and Eugene L. Miller represented the government in the prosecution. The charges were investigated by the Department of Housing and Urban Development’s Office of the Inspector General and the Federal Bureau of Investigation.

 

Ana Cummings61, Davie, Florida, the last of six South Florida family members was sentenced today to a term of imprisonment, and ordered to pay a total of $1,342,928.77 in restitution, following her conviction by way of guilty plea in August 2020, to conspiracy to commit bank fraud.

During prior hearings, Cummings’s sons, Valentin Pazmino, 34, and Rene A. Pazmino36, were sentenced to 27 months and 18 months of imprisonment, respectively. Her daughters, Grace Pazmin, 43, and Diana Pazmino, 31, were sentenced to 27 months and 22 months of imprisonment, respectively. Her son-in-law Jared Marble43, Grace Pazmino’s husband, was sentenced to 16 months of imprisonment. All sentences were imposed by United States District Judge Jose E. Martinez following guilty pleas. Pursuant to their plea agreements, the defendants made a full payment of the restitution judgment prior to their sentencings.

According to court documents, various defendants participated in a series of ten fraudulent real estate short sale transactions in South Florida between May of 2012 and June of 2015. Cummings and Grace Pazmino participated in all ten of the fraudulent short sales. Diana Pazmino and Valentin Pazmino each participated in nine of the fraudulent short sales. Marble participated in three of the fraudulent short sales. Rene A. Pazmino participated in two of the fraudulent short sales.  In each short sale transaction in which they participated, the defendants made materially false statements to a financial institution in order to defraud it into approving the short sale. Specifically, the defendants executed short sale affidavits and affidavits of arm’s length transactions falsely attesting that the sales were between unrelated, unaffiliated parties. In reality, the sales were between and among the defendants, companies controlled by the defendants, and/or individuals recruited by a defendant to participate in the fraud scheme. Members of the conspiracy also executed HUD-1 Settlement statements misrepresenting that the named buyer made the required cash-to-close payment.  In reliance on these material representations, various financial institutions authorized property sales for amounts less than the outstanding principal balances due on mortgages they held on the properties, thereby incurring losses.

Ariana Fajardo Orshan, United States Attorney for the Southern District of Florida, Tyler R. Hatcher, Acting Special Agent in Charge, Internal Revenue Service-Criminal Investigation, Miami Field Office, and Special Agent in Charge Edwin S. Bonano of the Federal Housing Finance Agency – Office of Inspector General (FHFA-OIG) Southeast Region made the announcement.

U.S. Attorney Fajardo Orshan commended the investigative efforts of the Internal Revenue Service-Criminal Investigation, Miami Field Division and the Federal Housing Finance Agency – Office of Inspector General Southeast Region.

A copy of this press release may be found on the website of the United States Attorney’s Office for the Southern District of Florida at www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the District Court for the Southern District of Florida at www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov, under case number 19-cr-20606-JEM.

 

Iskyo Aronov (also known as “Isaac Aronov”) Middle Village, New York, Ron Borovinsky, Hollis Hills, New York and Michael Konstantinovskiy, Roslyn Heights, New York have been charged in a wide-ranging mortgage fraud scheme to defraud the government.

In a complaint unsealed today, Aronov, Borovinsky, Konstantinovskiy, and companies that they owned or controlled (175 Vernon Ave. Inc., 308 Linde St. LLC, 725 Management LLC, 1021 B Holdings LLC, 1083 Lafayette Ave. LLC, 1178 Gates Ave. Inc., 2320 Baeumont Ave Unit 3d LLC, 1S8C Holdings LLC , Ag2 Equities, Inc., Arbie Management Inc., Bedstuy Group LLC, Bert Holdings LLC, BNE Management LLC, Etuy Equities LLC, IA Investors LLC, IJ Development LLC, LL Fund Inc., LL Organization Inc., MI 1 Holdings LLC, MIP Management Inc., My Ideal Property Group LLC, My Ideal Property Rockaway Blvd. LLC, National Homeowners Assistance Inc., Phase 2 Development LLC, Pim Equities Inc., Settle NY Corp, ZOR Equities LLC, ZT Equities LLC), have been charged in engaging in a fraudulent short sales of residential properties insured by the Federal Housing Administration (FHA) of the United States Department of Housing and Urban Development (HUD).

Pursuant to HUD’s Pre-Foreclosure Sale Program, qualifying homeowners with defaulted, FHA-insured mortgages may sell their properties in a “short sale” for less than the balance of the mortgage if the sale is for the fair market value of the property.  If a homeowner obtains approval for a short sale, the lender releases the mortgage after the short sale and submits an FHA insurance claim to HUD to cover the outstanding mortgage balance net of the short sale proceeds, plus approved costs and interest.  HUD, in turn, pays the lender’s claim from federal funds.

Aronov was the founder, Chief Executive Officer and President of defendants My Ideal Property Inc., My Ideal Property Group LLC and MIP Management Inc., and also controlled other affiliated corporate entities that he allegedly established to help him fraudulently acquire residential properties.  Borovinsky identified himself as a co-founder with Aronov of My Ideal Property.  Konstantinovskiy worked as an agent for My Ideal Property where he allegedly conspired with others to fraudulently obtain properties.

As alleged in the complaint, from at least 2013 through 2016, the defendants defrauded HUD by manipulating the short sale process to acquire residential properties from numerous distressed homeowners for below-fair market value prices in non-arm’s-length transactions.  The individual defendants used various corporate entities in furtherance of the fraudulent scheme.  In the process, defendants made a host of material misrepresentations in critical transaction documents.  As a result, defendants not only acquired the properties for below-fair market value prices, but obtained broker fees in the transactions and induced lenders to release the FHA-insured mortgages at a loss.  In turn, HUD paid the lenders’ claims for FHA insurance from federal funds.  These payments by HUD were artificially inflated as a result of the defendants’ fraudulent conduct.

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

As alleged, these defendants fraudulently obtained homes at depressed prices at the expense of a taxpayer-funded program designed to assist borrowers seeking the American Dream of home ownership,” stated Acting U.S. Attorney Seth DuCharme.  “This Office is committed to protecting the integrity of the FHA insurance program from those who try to enrich themselves through predatory mortgage fraud schemes.

The defendants allegedly engaged in a scheme of wholesale deception when they provided false, misleading, and incomplete information to lending institutions, homeowners, 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.  In addition, the artificial devaluation of residential properties will slow the recovery of market values at a time of economic challenge when affordable housing is at a premium,” stated HUD-OIG Special Agent-in-Charge Scaringi.

The Federal Housing Finance Agency, Office of Inspector General (FHFA-OIG) is committed to holding accountable those who waste, steal, or abuse the resources of the Government-Sponsored Enterprises regulated by FHFA.  We are proud to have partnered with the U.S. Attorney’s Office for the Eastern District of New York in this case,” stated FHFA-OIG Special Agent-in-Charge Manchak.

The suit is brought pursuant to the False Claims Act (FCA) and the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).

The government’s complaint intervenes in a lawsuit originally brought by under the qui tam provisions of the FCA.  Under the FCA, private citizens with knowledge of fraud against the government can bring a lawsuit on behalf of the United States and share in the recovery.  The act also permits the government to intervene in such actions, as the government has done in this case.  The government’s case is being handled by Assistant United States Attorney Michael J. Castiglione, with assistance from Affirmative Civil Enforcement Auditor Michael Gambrell.

 

Gabriel T. Tavarez, 40, the principal and co-founder of a North Andover, Massachusetts mortgage short sale assistance company pleaded guilty today in connection with defrauding mortgage lenders and investors out of nearly $500,000 in proceeds from about 90 short sale transactions.

Tavarez founded and co-operated Loss Mitigation Services, LLC, with co-conspirator Jaime L. Mulvihill, 40, North Andover, Massachusetts who previously pleaded guilty and was sentenced in February 2020 to six months in prison.

The charges arise out of the defendants’ scheme to steal undisclosed and improper fees from mortgage lenders in connection with short sales of homes. A short sale occurs where the mortgage debt on the home is greater than the sale price, and the mortgage lender agrees to take a loss on the transaction.

Loss Mitigation Services, purportedly acting on behalf of underwater homeowners, negotiated with mortgage lenders for approval of short sales in lieu of foreclosure. Mortgage lenders typically forbid short sale negotiators, such as Loss Mitigation Services, from receiving any proceeds of a short sale.

From 2014 to 2017, Tavarez and Mulvihill, directly or through their employees, falsely claimed to homeowners, real estate agents, and closing attorneys that mortgage lenders had agreed to pay Loss Mitigation Services fees known as “seller paid closing costs” or “seller concessions” from the proceeds of the short sales. In reality, the mortgage lenders had never approved Loss Mitigation Services to receive those fees. When the short sales closed, at the instruction of Tavarez or Mulvihill, or others working with them, settlement agents paid Loss Mitigation Services the fees, which typically were 3% of the short sale price above and beyond any fees to real estate agents, closing attorneys and others involved in the transaction. To deceive mortgage lenders about the true nature of the fees, Tavarez or Mulvihill filed, or caused others to file, false short sale transaction documents with mortgage lenders, including altered settlement statements and fabricated contracts and mortgage loan preapproval letters. Tavarez and Mulvihill fabricated the transaction documents, or caused them to be fabricated, in order to justify the additional fees and conceal that they were being paid to Loss Mitigation Services. In addition, Tavarez created, or directed others to create, fake letters from mortgage brokers claiming that the brokers had approved buyers for financing, in order to convince mortgage lenders to approve the additional fees. http://www.mortgagefraudblog.com/?s=Gabriel+T.+Tavarez

The charge of conspiracy to commit wire fraud provides for a sentence of up to 20 years in prison, three years of supervised release, and a fine of $250,000 or twice the gross gain or loss. The charge of aggravated identity theft carries a mandatory two-year sentence that must run consecutively to any other sentence imposed, one year of supervised release, and a fine of $250,000, or twice the gross gain or loss. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

Tavarez is scheduled for sentencing on October 7, 2020.

United States Attorney Andrew E. Lelling; Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; Robert Manchak, Special Agent in Charge, Federal Housing Finance Agency, Office of Inspector General, Northeast Region; Christina  Scaringi, Special Agent in Charge of the U.S. Department of Housing and Urban Development, Office of Inspector General, Northeast Regional Office; and Kristina O’Connell, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston made the announcement today. Assistant U.S. Attorneys Sara Miron Bloom and Brian M. LaMacchia of Lelling’s Office are prosecuting the case.

Jaime L. Mulvihill, 40, North Andover, Massachusetts, the principal and co-founder of a mortgage short sale assistance company was sentenced yesterday in connection with defrauding mortgage lenders and investors out of nearly $500,000 in proceeds from about 90 short sale transactions.

Mulvihill and her co-defendant Gabriel T. Tavarez founded and operated Loss Mitigation Services, LLC. The charges arise out of the defendants’ scheme to steal undisclosed and improper fees from mortgage lenders in connection with short sales of homes. A short sale occurs where the mortgage debt on the home is greater than the sale price, and the mortgage lender agrees to take a loss on the transaction.

Loss Mitigation Services, purportedly acting on behalf of underwater homeowners, negotiated with mortgage lenders for approval of short sales in lieu of foreclosure. Mortgage lenders typically forbid short sale negotiators, such as Loss Mitigation Services, from receiving any proceeds of a short sale.

From 2014 to 2017, Mulvihill and, allegedly, Tavarez, directly or through their employees, falsely claimed to homeowners, real estate agents and closing attorneys that mortgage lenders had agreed to pay Loss Mitigation Services fees known as “seller paid closing costs” or “seller concessions” from the proceeds of the short sales. In reality, the mortgage lenders had never approved Loss Mitigation Services to receive those fees. When the short sales closed, at the instruction of Mulvihill, or others working with her and Tavarez, settlement agents paid Loss Mitigation Services the fees, which typically were 3% of the short sale price above and beyond any fees to real estate agents, closing attorneys and others involved in the transaction. To deceive mortgage lenders about the true nature of the fees, Mulvihill or Tavarez filed, or caused others to file, false short sale transaction documents with mortgage lenders, including altered settlement statements and fabricated contracts and mortgage loan preapproval letters. Mulvihill and, allegedly, Tavarez, fabricated the transaction documents, or caused them to be fabricated, in order to justify the additional fees and conceal that they were being paid to Loss Mitigation Services. http://www.mortgagefraudblog.com/?s=Jaime+L.+Mulvihill

The defendants defrauded the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the U.S. Department of Housing and Urban Development.

Mulvihill was sentenced by U.S. Senior District Court Judge Rya W. Zobel to six months in prison, two years of supervised release, and ordered to pay restitution in the amount of $478,458 and forfeiture of $239,229. In November 2019, Mulvihill pleaded guilty to conspiracy to commit wire fraud.

Tavarez has pleaded not guilty and is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

United States Attorney Andrew E. Lelling; Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; Robert Manchak, Inspector General of the Federal Housing Finance Agency; Christina Scaringi, Special Agent in Charge of the U.S. Department of Housing and Urban Development, Office of Inspector General, Northeast Regional Office; and Kristina O’Connell, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston made the announcement today. Assistant U.S. Attorneys Sara Miron Bloom and Brian M. LaMacchia of Lelling’s Office are prosecuting the case.

 

Jaime L. Mulvihill, 40, the principal and co-founder of a North Andover mortgage short sale assistance company, pleaded guilty today in connection with defrauding mortgage lenders and investors out of nearly $500,000 in proceeds from about 90 short sale transactions.

Mulvihill was charged on November 8, 2019, with co-conspirator Gabriel T. Tavarez.

Together the defendants founded and operated Loss Mitigation Services, LLC. The charges arise out of the defendants’ scheme to steal undisclosed and improper fees from mortgage lenders in connection with short sales of homes. A short sale occurs where the mortgage debt on the home is greater than the sale price, and the mortgage lender agrees to take a loss on the transaction.

Loss Mitigation Services, purportedly acting on behalf of underwater homeowners, negotiated with mortgage lenders for approval of short sales in lieu of foreclosure. Mortgage lenders typically forbid short sale negotiators, such as Loss Mitigation Services, from receiving any proceeds of a short sale.

According to the court documents, from 2014 to 2017, Mulvihill and, allegedly, Tavarez, directly or through their employees, falsely claimed to homeowners, real estate agents and closing attorneys that mortgage lenders had agreed to pay Loss Mitigation Services fees known as “seller paid closing costs” or “seller concessions” from the proceeds of the short sales. In reality, the mortgage lenders had never approved Loss Mitigation Services to receive those fees. When the short sales closed, at the instruction of Mulvihill, or others working with him and Tavarez, settlement agents paid Loss Mitigation Services the fees, which typically were 3% of the short sale price above and beyond any fees to real estate agents, closing attorneys and others involved in the transaction. To deceive mortgage lenders about the true nature of the fees, Mulvihill or Tavarez filed, or caused others to file, false short sale transaction documents with mortgage lenders, including altered settlement statements and fabricated contracts and mortgage loan preapproval letters. Mulvihill and, allegedly, Tavarez, fabricated the transaction documents, or caused them to be fabricated, in order to justify the additional fees and conceal that they were being paid to Loss Mitigation Services.

The defendants defrauded the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the U.S. Department of Housing and Urban Development.

Mulvihill pleaded guilty to conspiracy to commit wire fraud before U.S. Senior District Court Judge Rya W. Zobel who scheduled sentencing for February 25, 2020.

The charge of conspiracy to commit wire fraud provides for a sentence of up to 20 years in prison, three years of supervised release, and a fine of $250,000 or twice the gross gain or loss. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

United States Attorney Andrew E. Lelling; Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; Robert Manchak, Inspector General of the Federal Housing Finance Agency; Christina Scaringi, Special Agent in Charge of the U.S. Department of Housing and Urban Development, Office of Inspector General, Northeast Regional Office; and Kristina O’Connell, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston made the announcement today. Assistant U.S. Attorneys Sara Miron Bloom and Brian M. LaMacchia of Lelling’s Office are prosecuting the case.

The details contained in the charging documents are allegations. The remaining defendant is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

George Bussanich Sr., 60, of Park Ridge, New Jersey and George Bussanich Jr., 39, Upper Saddle River, New Jersey, a father and son, were sentenced today to 27 months in prison and eight months of home detention, respectively, for their roles in a scheme 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.

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. and Bussanich Jr. also failed to disclose on their tax returns income that they received from the purported medical clinics and surgical centers. Bussanich Sr. and Bussanich Jr. used those funds to purchase high-end luxury vehicles and to purchase official bank checks to fund the fraudulent short sales.

Bussanich Sr., was sentenced to 27 months in prison. He previously pleaded guilty before U.S. District Judge Claire C. Cecchi to a superseding information charging him with one count of bank fraud conspiracy and one count of tax evasion. Bussanich Jr., was sentenced to eight months of home detention. He previously pleaded guilty to tax evasion. Judge Cecchi imposed both sentences today in Newark federal court.

In addition to the prison terms, Judge Cecchi sentenced Bussanich Sr. to five years of supervised release and Bussanich Jr. to three years of supervised release.

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 sentencings.

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.

Defense counsel: Stacy Biancamano Esq., Jersey City, New Jersey

 

Gabriel T. Tavarez, 39, and Jaime L. Mulvihill, 40, who together founded and operated Loss Mitigation Services, LLC, a mortgage short sale assistance company were charged today in connection with defrauding mortgage lenders and investors out of nearly $500,000 in proceeds from about 90 short sale transactions.

The defendants allegedly defrauded the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the U.S. Department of Housing and Urban Development.

Tavarez and Mulvihill were charged with conspiracy to commit wire fraud. Tavarez also was charged with aggravated identity theft.

The charges arise out of the defendants’ alleged scheme to steal undisclosed and improper fees from mortgage lenders in connection with short sales of homes. A short sale occurs where the mortgage debt on the home is greater than the sale price, and the mortgage lender agrees to take a loss on the transaction.

Loss Mitigation Services, purportedly acting on behalf of underwater homeowners, negotiated with mortgage lenders for approval of short sales in lieu of foreclosure. Mortgage lenders typically forbid short sale negotiators, such as Loss Mitigation Services, from receiving any proceeds of a short sale.

According to the court documents, from 2014 to 2017, Tavarez and Mulvihill, directly or through their employees, falsely claimed to homeowners, real estate agents, and closing attorneys that mortgage lenders had agreed to pay Loss Mitigation Services fees known as “seller paid closing costs” or “seller concessions” from the proceeds of the short sales. In reality, the mortgage lenders had never approved Loss Mitigation Services to receive those fees. When the short sales closed, at the instruction of Tavarez or Mulvihill, or others working with them, settlement agents paid Loss Mitigation Services the fees, which typically were 3% of the short sale price above and beyond any fees to real estate agents, closing attorneys and others involved in the transaction. To deceive mortgage lenders about the true nature of the fees, Tavarez or Mulvihill filed, or caused others to file, false short sale transaction documents with mortgage lenders, including altered settlement statements and fabricated contracts and mortgage loan preapproval letters. Tavarez and Mulvihill fabricated the transaction documents, or caused them to be fabricated, in order to justify the additional fees and conceal that they were being paid to Loss Mitigation Services. In addition, Tavarez created fake letters from mortgage brokers claiming that the brokers had approved buyers for financing, in order to convince mortgage lenders to approve the additional fees.

The charge of conspiracy to commit wire fraud provides for a sentence of up to 20 years in prison, three years of supervised release, and a fine of $250,000 or twice the gross gain or loss. The charge of aggravated identity theft carries a mandatory two-year sentence that must run consecutively to any other sentence imposed, one year of supervised release, and a fine of $250,000, or twice the gross gain or loss. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

United States Attorney Andrew E. Lelling; Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; Robert Manchak, Inspector General of the Federal Housing Finance Agency; Christina Scaringi, Special Agent in Charge of the U.S. Department of Housing and Urban Development, Office of Inspector General, Northeast Regional Office; and Kristina O’Connell, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston made the announcement today. Assistant U.S. Attorneys Sara Miron Bloom and Brian M. LaMacchia of Lelling’s Office are prosecuting the case.

The details contained in the charging documents are allegations. The defendants are presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

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.