Archives For warehouse lending fraud

Matthew T. Voss, 43, Northport, New York, formerly the Chief Operating Officer of Long Island mortgage lender Vanguard Funding, LLC (Vanguard), was sentenced today to conspiring to commit wire and bank fraud in connection with the diversion of more than $8.9 million of warehouse loans that Vanguard had fraudulently obtained purportedly to fund home mortgages and mortgage refinancing.

Between August 2015 and March 2017, Voss and his co-conspirators at Vanguard engaged in a scheme whereby they obtained more than $8.9 million in short-term loans, referred to as warehouse loans, by falsely representing that the loan proceeds would fund specific mortgages, or refinance specific mortgages, for Vanguard clients.  Instead, Voss and his co-conspirators diverted the funds to pay personal expenses and compensation, and to pay off loans they had previously obtained through false loan applications.  https://www.justice.gov/usao-edny/pr/former-ceo-long-island-mortgage-lender-sentenced-24-months-imprisonment-89-million

Voss was sentenced to 24 months’ imprisonment to be followed by three years’ supervised release.  The amount of restitution will be ordered by the Court at a later date.

Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Maria T. Vullo, Superintendent, New York State Department of Financial Services (DFS), announced the sentence.

With today’s sentence, Matthew Voss has been held accountable for using his extensive knowledge of the mortgage industry to deceive banks that trusted and relied upon him as a business partner and divert money for his personal use,” stated United States Attorney Donoghue.  “This Office, together with our law enforcement partners, will vigorously investigate and prosecute those who commit fraud to advance their own financial interests at the expense of businesses and residents of our community.”

A compromised banking system threatens economic stability and the safety of the mortgage industry, which puts communities and the American institution of homeownership at risk,” stated FBI Assistant-Director-in-Charge Sweeney.  “Thanks to the dedicated work of our law enforcement partners, today’s sentence proves that those who use their expertise to deceive others for their own financial gain will be held accountable to the fullest extent of the law.”

As New York’s financial services regulator, DFS is proud to have worked with the U.S. Attorney’s Office and other law enforcement partners to hold this defendant accountable for his actions,” stated DFS Superintendent Vullo.  “DFS will continue to combat fraud and bring criminals to justice in order to safeguard the industry and protect consumers.”

The government’s case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys Whitman G.S. Knapp and Elizabeth Losey Macchiaverna are in charge of the prosecution.

Edward J. Sypher, Jr., 41, Scarsdale, New York and Matthew T. Voss, 42, Northport, New York, senior executives at Long Island, New York mortgage lender Vanguard Funding, LLC (Vanguard), pleaded guilty today to conspiring to commit wire and bank fraud in connection with their diversion of more than $8.9 million of warehouse loans that Vanguard had obtained to fund mortgages.

According to court filings and the facts presented at the plea proceedings, between August 2016 and March 2017, Voss, Vanguard’s Chief Operating Officer, and Sypher, the Chief Financial Officer, engaged in a scheme in which they obtained warehouse loans, or short-term loans, for Vanguard by falsely representing that Vanguard would use the proceeds of those loans to fund mortgages or mortgage refinancing for Vanguard’s clients.  Once Vanguard received the loans, however, the defendants diverted the monies to pay personal expenses and compensation, and to pay off loans they had previously obtained with fraudulent loan submissions for improper purposes.

The guilty pleas were entered before United States District Judge Sandra J. Feuerstein.  When sentenced, each defendant faces up to 20 years in prison, as well as restitution, criminal forfeiture and a fine.

Richard P. Donoghue, United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office, and Maria T. Vullo, Superintendent, New York State Department of Financial Services, announced the guilty pleas.

The government’s case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys Whitman G.S. Knapp and Elizabeth Losey Macchiaverna are in charge of the prosecution.

John Reimer, 60, Boca Raton, Florida, was charged today with one count of bank fraud and one count of wire fraud, each of which carries a maximum sentence of 30 years in prison.   The indictment charges Reimer with bank fraud and mortgage fraud in connection with his participation in a scheme to defraud banks of money intended for individuals seeking loans to purchase or refinance their homes.

According to the allegations made in the Indictment:[1]

Reimer, who was the vice-president and comptroller of a mortgage lending institution (the “Mortgage Bank”), participated in a scheme to defraud several financial institutions (the “Warehouse Banks”) by causing the Warehouse Banks to provide funds to the Mortgage Bank, ostensibly to fund mortgage loans for residential properties, based on false and fraudulent documentation and representations made and provided by Reimer to the Warehouse Banks.

The Mortgage Bank was in the business of providing mortgage loans for residential properties (“Loans”).  Pursuant to agreements, the Warehouse Banks advanced sums of money to the Mortgage Bank so that the Mortgage Bank could fund Loans (the “Warehouse Advances”).  Once a Loan closed, the Mortgage Bank typically sold the loan to an investor and used the proceeds of the sale to re-pay the Warehouse Bank for the Warehouse Advance.

In order to obtain a Warehouse Advance for a particular loan, the Mortgage Bank was required, among other things, to provide the Warehouse Bank with certain documents and information about the Loan.  In addition, the notes and mortgages executed by the residential mortgagors were provided to the Warehouse Banks as collateral for the Warehouse Advances.  Reimer was responsible for providing the Warehouse Banks with the information and documents necessary to obtain the Warehouse Advances.

However, according to the Indictment, with respect to certain Loans, Reimer “double-pledged” residential properties by obtaining multiple Warehouse Advances from more than one Warehouse Bank to fund the same Loan, thus misleading each Warehouse Bank into believing that the Warehouse Advance it made to the Mortgage Bank was fully collateralized.

Moreover, according to the Indictment, with respect to certain Loans, Reimer falsely represented to the Warehouse Banks that the Loans were going to close imminently, when, in fact, such Loans were not imminently closing at the time the Warehouse Advances were made.  In some cases, the Loans never closed, but the Mortgage Bank nevertheless retained the Warehouse Advances made for those particular Loans.  In other cases, the Loans did close, but the Mortgage Bank used those Warehouse Advances to repay other Warehouse Advances.

According to the Indictment, in furtherance of the scheme, Reimer provided the Warehouse Banks with fraudulent documents, including mortgage notes on which Reimer falsified the signatures of the purported residential mortgagors.

According to the Indictment, from November 2008 through January 2009, Reimer used fraudulent misrepresentations to cause the Warehouse Banks to wire the Mortgage Company at least over $12 million.

Joon H. Kim, Acting United States Attorney for the Southern District of New York, William F. Sweeney Jr., Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Maria T. Vullo, Superintendent of the New York State Department of Financial Services (the “DFS”) made the announcement.

Acting U.S. Attorney Joon H. Kim said:  “As alleged, John Reimer, vice president of a mortgage bank, defrauded several other financial institutions of more than $12 million.  Reimer allegedly falsified documents, kept funding for mortgages that never closed, and even acquired funding multiple times for the same loans as part of the scheme.  Fraud schemes that target money intended for home loans can taint the market for honest homebuyers seeking to secure mortgages.  We will continue to work with our law enforcement and regulatory partners to ensure that schemes like the one charged here are stopped.”

FBI Assistant Director William F. Sweeney Jr. said:  “As alleged, Reimer capitalized on his knowledge of the mortgage-lending industry to exploit its vulnerabilities, causing serious damage to a number of warehouse banks fronting him an advance for the loans his bank was in the business of providing.  Mortgage fraud not only affects individual victims and institutions, it risks the overall stability of the housing market, accumulating losses across the board.  The FBI continues to support partnerships within the mortgage industry and law enforcement as we work together to combat this serious crime.”

Financial Services Superintendent Maria T. Vullo said:  “This defendant allegedly used his position and access as a banker to obtain millions of dollars in fraudulent loans.  As regulator of New York’s Financial Services industry, the Department of Financial Services is proud to have assisted the United States Attorney’s Office for the Southern District of New York in bringing this defendant to justice.”

The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Kim thanked the FBI and DFS for their outstanding work on the investigation.

This case is being handled by the Office’s White Plains Division.  Assistant United States Attorney Michael D. Maimin is in charge of the prosecution.

Edward E. Bohm, 39, Nissequogue, New York, Edward J. Sypher, Jr., 40, Scarsdale, New York, and Matthew T. Voss, 42, Northport, New York, all senior executives at Long Island mortgage lender Vanguard Funding, LLC (Vanguard), were the subject of a criminal complaint charging conspiracy to commit wire and bank fraud in connection with their obtaining more than $8.9 million of warehouse loans for Vanguard to fund mortgages.  The defendants allegedly misused the loans to pay personal expenses and compensation, as well as to repay earlier fraudulently obtained loans.

According to the complaint unsealed in federal court in Central Islip, New York, between August 2016 and March 2017, Voss, Vanguard’s Chief Operating Officer, Sypher, the Chief Financial Officer, and Bohm, the President of Sales, engaged in a scheme in which they obtained warehouse loans, or short-term loans, for Vanguard by falsely representing that Vanguard would use the proceeds of those loans to fund mortgages or mortgage refinancing for Vanguard’s clients.  Once Vanguard received the loans, however, the defendants used the monies to pay personal expenses and compensation and to pay off loans they had previously obtained with fraudulent loan submissions for improper purposes.  Nearly $9 million of fraudulently obtained, and subsequently misused, loans have been identified so far.

In a recorded conversation with a co-conspirator in 2017, Bohm expressed confidence that they would evade criminal liability because the victims of their fraudulent scheme were financial institutions. “At the end of the day, the s— we did wasn’t to the public,” Bohm stated in part, according to the complaint.

If convicted, the defendants face a statutory maximum of 30 years’ imprisonment for bank fraud conspiracy and 20 years’ imprisonment for wire fraud conspiracy.

The arrests were announced by Bridget M. Rohde, Acting United States Attorney for the Eastern District of New York, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Maria T. Vullo, Superintendent, New York State Department of Financial Services.

As alleged, the defendants – executives of a mortgage lender – defrauded banks into lending them money by stating that the money would fund new mortgages or refinance existing ones,” stated Acting United States Attorney Rohde.  “We will continue to address dishonesty in the mortgage industry whether the victims are financial institutions, investors, or homeowners, as it ultimately hurts all of us as a community.”

As alleged, the defendants sought short-term loans from financial institutions that served as a repository for lenders,” stated FBI Assistant Director-in-Charge Sweeney. “They then allegedly took the money, which is typically intended for borrowers looking to purchase a home, and used it for their own personal gain. Today’s charges are proof of our continued determination to root out those whose business practices attempt to harm the financial integrity of banks and financial institutions that facilitate homeownership.”

These defendants, for their own gain, allegedly defrauded the financial institutions that provide funding for individuals to buy homes, and they must be held accountable,” said Financial Services Superintendent Vullo.  “As the regulator and protector of financial services companies in New York, the Department of Financial Services is proud to have assisted the Acting United States Attorney in bringing these defendants to justice.”

The government’s case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys Whitman G.S. Knapp and Elizabeth Losey Macchiaverna are in charge of the prosecution.