Final Family Member Sentenced in Short Sale Mortgage Fraud Scheme

Stephanie Abbott —  March 22, 2021 — Leave a comment

Ana Cummings, 61, 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. Pazmino, 36, 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 Marble, 43, 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.

 

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Eleven Plead Guilty to Running a Mortgage Fraud Scheme

Stephanie Abbott —  March 19, 2021 — Leave a comment

Eric Hill, 50, Tyrone, Georgia, Robert Kelske, 52, Smyrna, Georgia,  Fawziyyah Connor, 41, Tyrone, Georgia, Stephanie Hogan, 57, Norcross, Georgia, Jerod Little, 42, McDonough, Georgia, Renee Little, 33, McDonough, Georgia, Maurice Lawson, 36, Powder Springs, Georgia, Todd Taylor, 54, Fairburn, Georgia, Paige McDaniel, 49, Stockbridge, Georgia, Donald Fontenot, 52, Locust Grove, Georgia, and Anthony Richard, 44, Locust Grove, Georgia, have pleaded guilty to conspiracy to defraud the United States in a mortgage fraud scheme spanning more than four years and resulting in the approval of more than 100 mortgages based on fabricated documents and false information.

According to the charges and other information presented in court: The defendants participated in a conspiracy in which homebuyers and real estate agents submitted fraudulent loan applications to induce mortgage lenders to fund mortgages.

Listing agents Eric Hill and Robert Kelske represented a major nationwide homebuilder and helped more than 100 homebuyers who were looking to buy a home, but who were unqualified to obtain a mortgage, commit fraud.  The agents instructed the homebuyers as to what type of assets they needed to claim to have in the bank, and what type of employment and income they needed to submit in their mortgage applications.

Hill and Kelske then coordinated with multiple document fabricators, including defendants Fawziyyah Connor and Stephanie Hogan, who altered the homebuyers’ bank statements to inflate their assets and to create bank entries reflecting false direct deposits from an employer selected by the real estate agent.  The document fabricators also generated fake earnings statements that matched the direct deposit entries to make it appear that the homebuyer was employed, and earning income, from a fake employer.  Other participants in the scheme then acted as employment verifiers and responded to phone calls or emails from lenders to falsely verify the homebuyers’ employment.  Defendants Jerod Little, Renee Little, Maurice Lawson, Todd Taylor, Paige McDaniel and Donald Fontenot acted as employment verifiers.  Hill and Kelske coordinated the creation and submission of the false information so that the lies to the lenders were consistent.

In another aspect of the scheme, real estate agent Anthony Richard falsely claimed to represent homebuyers as their selling agent in order to receive commissions from the home sales.  In reality, Richard had never even met the homebuyers he claimed to represent.  To avoid detection, he often notified closing attorneys that he would be unable to attend the closing and sent wire instructions for the receipt of his commissions.  When Richard received his unearned commissions, he kicked back the majority of the commissions to Hill or Kelske for enabling him to be added to the deal, keeping a small share for his role in the scheme.

Many of the loans are insured by the Federal Housing Administration (FHA) resulting in claims being paid for mortgages that have defaulted.

“These defendants brazenly manipulated the real estate lending process by using their knowledge of the system,” said Acting U.S. Attorney Kurt Erskine.  “Mortgage fraudsters threaten the soundness of the real estate market in our community and divert critical resources away from those borrowers who properly qualify for loans.  Rooting out bad actors who attempt to abuse the system for their own personal gain makes the mortgage lending system safer and fairer for everyone.”

“These defendants who dragged down our economy by using deception, will now be sentenced and forced to reimburse the victims of their conspiracy,” said Chris Hacker, Special Agent in Charge of FBI Atlanta. “The FBI is committed to combating such criminal activity to protect our citizens and the real estate market from predators who are most interested in pocketing money that they have no right to.”

“These offenders engaged in blatant criminal acts with the sole purpose of enriching themselves at the cost of a federal housing program designed to assist millions of American homebuyers.  Their fraudulent undertaking strikes at the fiscal integrity of the FHA and we will work diligently in conjunction with our law enforcement partners to hold them accountable” said Wyatt Achord, Special Agent in Charge, HUD Office of Inspector General.

“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 Northern District of Georgia in this case,” said Edwin S. Bonano, Special Agent-in-Charge, FHFA-OIG, Southeast Region.

These defendants have agreed to pay restitution to the victims of their conspiracy, including the Department of Housing and Urban Development, which insures many of the residential mortgages in the United States. Sentencing hearings have been set for these defendants before U.S. District Judge Mark H. Cohen.

A twelfth defendant, Cephus Chapman, 49, Warner Robins, Georgia is awaiting trial.  Members of the public are reminded that the indictment only contain charges.  The defendant is presumed innocent of the charges and it will be the government’s burden to prove the defendant’s guilt beyond a reasonable doubt at trial.

This case is being investigated by the Federal Bureau of Investigation, Department of Housing and Urban Development Office of Inspector General, and Federal Housing Finance Agency Office of Inspector General.

Assistant U.S. Attorneys Alison Prout and Ryan Huschka are prosecuting the case.

For further information please contact the U.S. Attorney’s Public Affairs Office at USAGAN.PressEmails@usdoj.gov or (404) 581-6016.  The Internet address for the U.S. Attorney’s Office for the Northern District of Georgia is http://www.justice.gov/usao-ndga.

 

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Four Charged With Wide-Ranging Mortgage And Insurance Fraud Scheme

Stephanie Abbott —  March 4, 2021 — Leave a comment

Robert Morgan, Todd Morgan, Frank Giacobbe, and Michael Tremiti, have been charged with conspiracy to commit wire fraud and bank fraud for their roles in a wide-ranging mortgage fraud scheme.

According to the indictment, between 2007 and January 2019, the defendants conspired with Kevin Morgan, Patrick Ogiony, Scott Cresswell, and others fraudulently to obtain funds from financial institutions such as Arbor Commercial Mortgage, LLC, Berkadia Commercial Mortgage, LLC, UBS and Deutsche Bank, and government sponsored enterprises, including Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal National Mortgage Association (Fannie Mae).

During the course of the conspiracy, the defendants engaged in a scheme to defraud financial institutions and government sponsored enterprises by providing false information to lenders in support of applications for mortgage loans to purchase properties, refinance properties or build properties. As part of the applications for mortgage loans, the defendants submitted inflated and false rent rolls which included non-existent tenants and inflated rents to fraudulently increase the income for a building in order to justify a loan amount that they would not otherwise qualify for.  Similarly, in order to further inflate the income, defendants told lenders they were receiving fake fees, such as stating that residents paid for cable when it was actually included in the rent.  Defendants also fraudulently reduced and improperly capitalized expenses in order to make the property appear to generate more income to, again, justify a larger mortgage loan than they would otherwise qualify for.

The defendants took steps to conceal the fraud from the lenders, including by making vacant units appear occupied during inspections by turning radios on in vacant units, by placing welcome mats and shoes in hallways outside vacant units, and by paying individuals to pretend to be tenants in units the inspectors would enter.

In the wire fraud conspiracy to defraud insurers, Todd Morgan and Robert Morgan are accused of conspiring with Kevin Morgan and Scott Cresswell to present false and inflated contracts and invoices to insurance companies for repairs after damages to properties in Robert Morgan’s real estate portfolio.

While the loans which were the subject of defendants’ alleged fraudulent conduct exceeded $400 million in value, the total loss sustained by financial institutions and government sponsored enterprises throughout the mortgage fraud scheme is currently estimated to exceed $9,500,000. The loss resulting from the insurance fraud scheme is currently estimated at approximately $3,000,000.

The defendants were arraigned before U.S. Magistrate Judge H. Kenneth Schroeder and were released on conditions.

Defendants Kevin Morgan and Patrick Ogiony were previously convicted of conspiracy to commit bank fraud, and defendant Scott Cresswell was previously convicted of conspiracy to commit wire fraud for their roles in the multi-million dollar fraud scheme. All three defendants are awaiting sentencing.

The defendants each face charges of wire and bank fraud. Robert and Todd Morgan are also charged with defrauding insurance companies. The charges carry a maximum penalty of 30 years in prison and a fine in the amount of double the loss caused by the crimes.

U.S. Attorney James P. Kennedy, Jr. made the announcement.

“Upon executing search warrants in this case, my Office, together with our law enforcement partners, acted quickly to take action in an effort to try to limit the amount of damage occasioned by the defendants’ alleged widespread fraud,” noted United States Attorney Kennedy.  “While that effort succeeded in that objective, the unfortunate truth is that the swiftness with which we moved may have also contributed to the reasons for which the original indictment in this case was dismissed by the Court.  In the end, however, this new indictment now ensures that the defendants will be held to answer for the serious crimes alleged therein.”

The indictment is the result of an investigation by the Federal Bureau of Investigation, under the direction of Special Agent-in-Charge Stephen Belongia, and the Federal Housing Finance Agency, Office of Inspector General, under the direction of Special Agent-in-Charge Robert Manchak, Northeast Region.

The fact that a defendant has been charged with a crime is merely an accusation and the defendant is presumed innocent until and unless proven guilty.

 

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R. E. Developer Charged in Mortgage Fraud Scheme

Stephanie Abbott —  February 2, 2021 — Leave a comment

Andrzej Lajewski, 53, formerly of Wheeling, Illinois, a real estate developer, who owned Des Plaines-based Highland Consulting Corp., and Chicago-based Quality Management and Remodeling Inc., has been indicted with three others for allegedly participating in a mortgage fraud scheme that defrauded financial institutions out of at least $3 million.

According to an indictment returned Jan. 28, 2021, Lajewski schemed with two mortgage professionals and the owner of a remodeling company to fraudulently obtain at least $3 million in mortgage loans by making and causing to be made materially false representations to financial institutions regarding the buyers’ qualifications for the loans. The false representations concerned the buyers’ employment history, income, assets, source of down payment, and intention to occupy the properties, the indictment states.  In some instances Lajewski fraudulently claimed to lenders that the buyers were employed by his companies – even though he knew that was untrue – to help the buyers qualify for the mortgage loans, the indictment states.

The alleged fraud scheme lasted from 2010 to 2016 and involved numerous properties on the South Side of Chicago.

The indictment charges multiple counts of financial institution fraud against Lajewski, and two mortgage professionals – loan originator Agnieszka Siekowski, 46, Northbrook, Illinois and loan processor Aldona Bobrowicz, 45, Arlington Heights, Illinois and the home remodeler, Andrzej Bukowski, 66, formerly of Wheeling, Illinois.  Arraignments for Siekowski and Bobrowicz are scheduled for Friday at 10:00 a.m. before U.S. District Judge Martha M. Pacold.  Arraignments for Lajewski and Bukowski have not yet been scheduled.

The indictment was announced by John R. Lausch, Jr., United States Attorney for the Northern District of Illinois; and Brad Geary, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development, Office of Inspector General.  The government is represented by Assistant U.S. Attorneys Kalia Coleman and Jason Yonan.

The public is reminded that an indictment is not evidence of guilt.  The defendants are presumed innocent and entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.  Each count of financial institution fraud is punishable by up to 30 years in federal prison.  If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory U.S. Sentencing Guidelines.

 

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Attorney General Co-Leads Bipartisan Coalition Fighting for Homeowners

Stephanie Abbott —  January 29, 2021 — Leave a comment

Minnesota Attorney General Keith Ellison and New York Attorney General Letitia James today led a bipartisan coalition of 33 attorneys general in opposing a proposed class action settlement that would permit PHH Mortgage Corporation and its predecessor corporation, Ocwen Loan Servicing, LLC (collectively “PHH”), to continue to profit from often-illegal payment-processing fees that they charge to homeowners.

For years, PHH has been charging more than 17,000 homeowners in Minnesota and close to a million homeowners nationwide, a fee – anywhere from $7.50 to $17.50 each time – solely to make their monthly mortgage payment if that payment is made by phone or through the homeowner’s online account. Nowhere in these homeowners’ mortgage contracts is there authorization for such fees. In fact, PHH does not charge “processing” fees when its customers pay by check or set up automatic debit payments.

But under the terms of the proposed class settlement — a settlement that was hastily entered into only five months after the complaint was filed — PHH would be permitted to continue to charge these fees, up to $19.50 per month, for the remaining life of the loan, which for many Minnesotans could be another 20 to 30 years. In exchange, homeowners will receive a paltry, and for some, illusory, one-time monetary payment. In addition, the proposed settlement seeks to authorize these unlawful fees through an unwritten, mass amendment of the mortgages, a violation of most states’ statutes of frauds, a centuries-old legal doctrine that requires contracts related to property be in writing and signed by the parties.

As if transforming homeowners into a profit center in violation of states’ laws was not enough, the proposed settlement is designed to ensure that a portion of the monetary relief intended for homeowners will actually end up in PHH’s hands. For homeowners whose loans are still serviced by PHH, the only relief will be a credit to their account, with late fees being paid before any credit is applied to the unpaid principal balance of the mortgage. As a result, these credits toward late fees are more of a self-dealing payment to PHH rather than any kind of relief to the homeowner.

Finally, any settlement funds not distributed to the class member homeowners will be returned to PHH. Such a feature in a class-action settlement often suggests to courts that the settlement simply benefits the attorneys involved and is not in the best interest of the impacted class members.

Attorneys General Ellison and the coalition filed an amicus brief in U.S. district court in Florida opposing the proposed settlement in Morris et al. v. PHH Mortgage Corporation, et al.

“Affording your life is tough enough — and for years, PHH has made it tougher on 17,000 Minnesotans by charging them outlandish, unnecessary, and possibly illegal fees just for the privilege of paying their mortgage. Now, this hastily settled class action lawsuit will allow PHH to continue this harmful practice, in some cases for decades. This doesn’t pass the smell test,” Attorney General Ellison said. “The job of attorneys general is to protect the residents of our states against abuse. I’m proud that more than 30 of us have rallied to stand up for our homeowners and push back on this proposed settlement that benefits the abuser.”

Joining Attorneys General Ellison and James in filing today’s amicus request are the attorneys general of Alaska, Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Maine, Maryland, Massachusetts, Michigan, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, Washington, and West Virginia.

 

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Call Center Manager Pleads Guilty to Defrauding Homeowners

Stephanie Abbott —  January 26, 2021 — Leave a comment

Edwin Josue Herrera Rosales aka “Josh Herrera,” 34, Washington pleaded guilty today to a conspiracy to defraud approximately 1,000 distressed homeowners facing foreclosure.  Herrera Rosales pleaded guilty to one count of conspiracy to commit wire fraud in connection with his operation of call centers that operated under the names “Sound Solutions Group,” “Community Assistance Center,” and California-based “Sienna Support Network.”

Herrera Rosales and his co-conspirators sent solicitation mailers to distressed homeowners nationwide.  The mailers promised that Herrera Rosales’ organization could reduce homeowners’ mortgage debts and lower their monthly payments.  When homeowners called the call center, operators put the callers through a phony “underwriting” process and then told the callers that the company’s legal and underwriting staff had determined it could negotiate a favorable mortgage modification in exchange for an upfront fee of $3,000.  In fact, the call center had no legal or underwriting staff, and many of the homeowners did not receive the promised modifications.

According to records filed in the case, Herrera Rosales conspired with others based in Southern California to operate the scheme.  Each week the operation sent approximately 4,000 mailers to distressed homeowners across the country.  The mailers stated that that the homeowner had been “pre-approved” for a new government program, under which Herrera Rosales’s organization could negotiate a mortgage modification.  For example, one mailer said that Herrera Rosales’s organization could reduce a borrower’s loan balance by over $140,000 and could reduce the interest rate to 2%.  The mailers urged the homeowners to call the Everett call center for assistance.

Herrera Rosales oversaw a staff of call center operators.  When homeowners contacted the call center, Herrera Rosales directed the operators to follow a script designed to make it appear as if each caller’s mortgage was being reviewed by the company’s “underwriting” and “legal department” to make sure the homeowner qualified for the supposed federal program.  In fact, the call center had no legal staff or underwriting department.  Instead, operators were instructed simply to put each caller on hold for a pre-determined amount of time, to make it appear a review was underway.  The operator then would return to the line and tell each victim that he or she was one of the “very select few” who qualified for the program—but only if the homeowner paid the call center a $3,000 fee.  If the homeowner balked at the fee, the call center staff had another script with certain “hot button” statements to persuade them to sign the documents.  It is impermissible under federal regulations to charge upfront fees for mortgage modification services.

Once the contracts were signed, the call center submitted the homeowner’s paperwork to a California-based loan processing group, which made some minimal efforts to restructure the debt.  While a limited number of customers obtained a lower monthly payment, the vast majority had no change or, in some cases, a higher monthly payment.  The call center used a phony address, and operators used aliases to disguise their identities.

Between March 2016 and May 2018, about 1,000 customers paid over $2.5 million to the various entities operated by Herrera Rosales.  After Herrera Rosales paid the expenses of the call centers and paid a share to his co-conspirators, he kept approximately $360,000.

Herrera Rosales is scheduled for sentencing by U.S. District Judge John C. Coughenour on May 4, 2021.

The announcement was made by U.S. Attorney Brian T. Moran.

The case is being investigated by the FBI.  The case is being prosecuted by Assistant United States Attorney Seth Wilkinson.

herrera_rosales_information.pdf

 

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Former Member of Bank Board of Directors Pleads Guilty to Charge of Making False Statements

Stephanie Abbott —  January 14, 2021 — Leave a comment

Brian Thomas Twilley, 57, Greenbackville, Virginia, formerly of Salisbury, Maryland, pleaded guilty yesterday to making a false statement on a loan or credit application.

From 2011 through 2015, Brian Twilley served as a member of the Board of Directors for Hebron Savings Bank, located in Wicomico County, Maryland. Twilley also owned a commercial printing business in Wicomico County and was a member of the faculty for the Economics and Finance Department at Salisbury University.

According to his guilty plea, from April 2010 through March 2017, Twilley provided false personal financial statements to Hebron that omitted from his net worth a $200,000 Home Equity Line of Credit (“HELOC”) due to Bank 2 that should have been paid off and closed with the proceeds of a separate HELOC that Twilley had obtained from Hebron. Twilley also provided false personal financial statements to Bank 3.

As detailed in his plea agreement, in August 2006 Hebron issued Twilley a $350,000 HELOC for the purpose of paying off and closing his $200,000 HELOC at Bank 2. As part of Hebron’s approval of the HELOC it required that Bank 2 release their lien on Twilley’s personal residence so that Hebron could secure a first-position lien on this collateral. On August 28, 2006, Twilley signed a letter addressed to Bank 2 directing them to accept the payoff of the loan, close the HELOC account, and forward the release documents to Hebron. The payoff was funded with a Teller’s Check issued by Hebron in the amount of $200,392.04, but the letter directing Bank 2 to close the loan was never delivered and the HELOC account at Bank 2 remained open. Twilley admitted that he continued to make withdrawals of the available funds in Bank 2’s HELOC and by 2010 had withdrawn the full $200,000 available.

As a member of Hebron’s Board of Directors and as a condition of his ongoing loan relationship with Hebron, which included the $350,000 HELOC and multiple commercial loans, Twilley was required to provide Hebron with an annual personal net worth statement. Twilley admitted that from 2010 through 2014 he provided Hebron with his personal financial statement, but failed to disclose the continued existence of the HELOC with Bank 2, which Hebron believed had been closed since 2006.

Further, in December 2014, as part of a request to renew a $100,000 commercial line of credit for his company with Bank 3, Twilley submitted a personal financial statement to Bank 3 that failed to disclose the existence of the HELOC with Bank 2 and the associated debt. When Twilley was questioned by a representative of Bank 3 as to why his credit report reflected a $200,000 HELOC due to Bank 2 that was not listed on his net worth statement, Twilley falsely advised that the HELOC at Bank 2 had been closed when he opened the HELOC at Hebron. The Bank 3 representative informed Twilley that Hebron may want to contact Bank 2 to have them close out the HELOC because Hebron’s secured position in the collateral might be behind Bank 2 if the lien was not released.

Twilley left his position as a member of Hebron’s Board of Directors in 2015. By 2017, Twilley was having difficulty servicing his debts and Hebron attempted to restructure his loan payments. As part of the negotiations, on March 17, 2017, Twilley again sent a personal financial statement to Hebron that failed to disclose the existence of his debt due on the HELOC with Bank 2, which then had a balance of approximately $176,000, thereby underreporting Twilley’s outstanding obligations. When a representative subsequently suggested that the collateral for the Hebron HELOC be sold, they learned that Bank 2 still held a first-position lien on the property because the HELOC with Bank 2 had never been closed. In July 2018 Twilley declared bankruptcy and Hebron restructured all of Twilley’s personal and commercial debts. In November 2018, the collateral for the HELOC was sold and $163,081.88 of the proceeds was disbursed to Bank 2 as a lien holder in first position, depriving Hebron of the proceeds of the sale.

As part of his plea agreement, Twilley will be required to pay restitution of $163,081.88, the full amount of the victim’s loss.

Twilley faces a maximum sentence of 30 years in federal prison for making a false statement on a loan or credit application. Actual sentences for federal crimes are typically less than the maximum penalties and are determined by a federal district court judge after taking into account the U.S. Sentencing Guidelines and other statutory factors. U.S. District Judge Stephanie A. Gallagher has not yet scheduled a sentencing date for Twilley.

The guilty plea was announced by United States Attorney for the District of Maryland Robert K.

Hur; Special Agent in Charge Robert W. Manchak of the Federal Housing Finance Agency, Office of Inspector General (FHFA OIG); and Special Agent in Charge Shimon R. Richmond of the Federal Deposit Insurance Corporation, Office of Inspector General (FDIC OIG).

United States Attorney Robert K. Hur commended the FHFA OIG and FDIC OIG for their work in the investigation. Mr. Hur thanked Assistant U.S. Attorney Sean R. Delaney, who is prosecuting the case.

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Man Indicted In Nationwide Mortgage Fraud Scheme

Stephanie Abbott —  January 12, 2021 — Leave a comment

Brian Roy Lozito, 51, Orange Park, Florida has been charged with conspiracy to commit wire fraud and 12 counts of wire fraud.

According to the indictment, Lozito owned and managed American Investigative Services (AIS). AIS purported to offer consumers mortgage auditing services in exchange for a fee. Lozito and his conspirators solicited customers nationwide through mailings and telephone calls. In these solicitations, Lozito and AIS employees under his direction made false and fraudulent representations to consumers, including that AIS would perform “forensic audits” of mortgage documents in order to uncover evidence of deficiencies in the mortgage documents. Lozito claimed AIS would obtain quitclaim deeds and other remedies, so the mortgage holders would be relieved of their mortgage debt and own their properties free and clear. If AIS could not help the consumer, Lozito promised to refund their money. In reality, AIS did not perform the services paid for by consumers and did not refund money to consumers. Money collected from consumers went to bank accounts controlled by Lozito, and he spent the money.

An indictment is merely a formal charge that a defendant has committed one or more violations of federal criminal law, and every defendant is presumed innocent unless, and until, proven guilty.

If convicted, Lozito faces a maximum penalty of 20 years in federal prison on each count and payment of restitution to the victims he defrauded. Lozito was arraigned on the charges on January 11, 2021. His trial is set for March 1, 2021.

United States Attorney Maria Chapa Lopez made the announcement.

This case was investigated by the U.S. Secret Service (Jacksonville Field Office) and the Office of the Florida Attorney General – Consumer Protection Division, with assistance from the Clay County Sheriff’s Office. It will be prosecuted by Assistant United States Attorney Kevin C. Frein.

 

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Action to Stop Sham Mortgage Relief Scheme Announced

Stephanie Abbott —  January 6, 2021 — Leave a comment

Neal J. Vanderpoel II and Eileen P. Vanderpoel, Medford, New Jersey and their sons Ryan Vanderpoel, Medford, New Jersey and Neal J. Vanderpoel IV, Magnolia, New Jersey, as announced today, have been charged in a lawsuit to halt a scheme in which they operated multiple companies to defraud struggling homeowners by offering them mortgage adjustment services that provided no meaningful relief and often made their precarious financial situation even worse.

The State’s complaint alleges that the Vanderpoels’ advertised, offered for sale, and performed fraudulent or worthless loan modification and other debt adjustment services to New Jersey consumers through a web of corporate entities. The corporate entities include Financial Services for America; Financial Processing Services, LLC; Tri-State Financial Relief, LLC; and Mortgage Help and Loan Audits of America, LLC, which are also named as Defendants.

Through their corporate entities, most of which were not authorized to provide debt adjustment services in New Jersey, the Vanderpoels charged consumers up-front rates grossly in excess of the legal limits for permissible charges by licensed debt adjusters, netting them well over a million dollars in profits, the suit alleges.

After filling financially distressed consumers with false hope of guaranteed loan modifications, the Defendants failed to deliver, often causing consumers to fall further behind on their mortgage payments and making the threat of foreclosure more imminent, the suit alleges.

The State’s 18-count complaint alleges that the Defendants grossly exceeded the $25.00 fee cap imposed by the New Jersey’s Debt Adjustment and Credit Counseling Act by charging at least 556 New Jersey consumers $3,200 or more to prepare a “Forensic Audit Report,” which would purportedly assist consumers in their mortgage modifications.

The complaint also alleges that Defendants violated the New Jersey Consumer Fraud Act, advertising regulations, and the Nonprofit Corporations Act.

According to the complaint, the Defendants rarely if ever reviewed the consumers’ underlying notes or mortgage instruments and were not qualified to render opinions as to the legality of a consumer’s mortgage. The “Forensic Audit Report,” which Defendants generated using third-party compliance software, did not in fact assist consumers with their mortgage modifications, as promised by Defendants, and was largely worthless, the complaint alleges.

As a result of Defendants’ unconscionable and unlawful practices, consumers often forfeited all monies paid to Defendants, were forced to spend additional time and money to try to remain in their homes, were forced to file for bankruptcy, ended up losing their homes in foreclosure, and/or were forced to modify their loans on less favorable terms, the complaint alleges.

Today, the State also obtained a court order temporarily restraining Defendants from providing any loan modification or debt adjustment services, preventing Defendants from conducting business under unregistered assumed names, freezing all assets of Financial Services of America and the other corporate entities, and prohibiting Defendants from disposing of any assets derived from their purported mortgage modification businesses, among other relief.

The current action is brought against not only the current entities, but also against the family members individually. The State sought and secured temporary restraints in part to prevent the Vanderpoels and their companies from seeking to evade accountability as they had in the past.

Attorney General Gurbir S. Grewal and Department of Banking and Insurance (DOBI) Commissioner Marlene Caride made the announcement today.

“We have zero tolerance for predatory practices targeting vulnerable consumers who want nothing more than to stay in their homes, especially in the midst of a pandemic,” said Attorney General Grewal. “And by partnering with the Department of Banking and Insurance, as we are today, we are sending a message that we won’t hesitate to bring the full range of the State’s consumer financial protection laws to bear when we crack down on unconscionable consumer abuses.”

“Today was an important step in ending the deceitful practices perpetrated by these individuals and preventing other homeowners from falling victim to this scheme. These defendants took advantage of people already struggling financially and made their situations worse. The fact that they targeted our residents during a time when people are especially vulnerable makes their actions that much more reprehensible. With this action we are sending a message that those who engage in predatory and abusive practices will be held accountable,” said Commissioner Caride.

Today’s lawsuit reflects the Division of Consumer Affairs’ increased focus during the Murphy Administration on unconscionable practices in the markets for consumer financial products and services.

Those protections are especially important as the COVID-19 emergency enters its eleventh month. And the State’s complaint alleges that the Vanderpoels sought to capitalize on consumers’ financial insecurity by misleadingly suggesting that one of their companies offers services designed to address hardships caused by the COVID-19 pandemic.

“For most homeowners, the prospect of losing their homes is a time of stress and fear. In this lawsuit, we allege that these defendants callously preyed on that vulnerability,” said Paul R. Rodríguez, Director of the Division of Consumer Affairs. “Instead of helping homeowners out of a financial crisis, as they promised, defendants made it worse by causing people to fall further into debt as they paid for undelivered services with money that could have been applied to their mortgages.”

For the Division of Consumer Affairs, Deputy Attorney Donna J. Dorgan, Assistant Section Chief John Regina and Section Chief Patricia Schiripo of the Consumer Fraud Prosecution Section in the Division of Law’s Affirmative Civil Enforcement Practice Group and Assistant Attorney General Jeremy Hollander of the Affirmative Civil Enforcement Practice Group are handling the matter, with assistance from attorney Andrew Esoldi.  Investigator Brian Penn and Loretta Creggett and Supervising Investigator Jennifer Micco of the Office of Consumer Protection are handling the investigation for the Division

For the Department of Banking and Insurance, the matter is being handled by Deputy Attorney General Garen Gazaryan, Assistant Section Chief Nicholas Kant, Section Chief Richard E. Wegryn, Jr., and Assistant Attorney General Raymond R. Chance, III, in the Division of Law’s Financial Affairs Practice Group.

Consumers who believe they have been cheated or scammed by a business, or suspect any other form of consumer abuse can file an online complaint with the State Division of Consumer Affairs by visiting its website or calling 1-800-242-5846 to receive a complaint form by mail.

Consumers who have any issue or complaint concerning any entity regulated by the Department of Banking and Insurance, can contact the Department’s Consumer Hotline at 1-800-446-7467 or go to the Department website and click on Consumer Assistance – Inquiries/Complaints, at https://www.dobi.nj.gov

The mission of the Division of Consumer Affairs, within the Department of Law and Public Safety, is to protect the public from fraud, deceit, misrepresentation and professional misconduct in the sale of goods and services in New Jersey through education, advocacy, regulation and enforcement. The Division pursues its mission through its 51 professional and occupational boards that oversee 720,000 licensees in the state, its Regulated Business section that oversees 60,000 NJ registered businesses, as well as through its Office of Consumer Protection, Bureau of Securities, Charities Registration section, Office of Weights and Measures, and Legalized Games of Chance section.

 

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U. S. Files Civil Fraud Suit Alleging Mortgage Fraud Scheme

Stephanie Abbott —  January 4, 2021 — Leave a comment

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.

 

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