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Jason Alain Wu and Michael Andrew Kergosien were indicted in the Northern District of Texas, Dallas Division, on August 28, 2019 and charged with one count of conspiracy to defraud HUD and five counts of mail fraud, aiding and abetting.

According to the indictment:

Wu was the owner of American Home Free Mortgage, LLC (“AHFM”), a company that assisted homebuyers with obtaining financing, including interim financing, to construct and purchase a manufactured home.  Kergosien was employed by AHFM as a loan officer, director of sales, and director of operations.  MK Financial Services, LLC (“MK Financial”) and 1X Funding, LLC (“1X Funding”) were shell “third party companies” set up at the direction of Wu or Kergosien to receive fraudulent construction management fees as a means to recoup AHFM’s costs associated with interim financing without disclosing the true nature of the fees to the borrowers or HUD or obtaining the borrower’s agreement to pay the fees. Under HUD’s Construction to Permanent Loan Program, lenders who provide interim financing during the construction of a home are prohibited from charging a borrower additional fees unless the borrower signs a separate agreement specifically agreeing to pay the fees.

In or about November 2010 through at least September 2016, Wu and Kergosien caused AHFM employees to submit false invoices to title companies, on behalf of MK Financial and 1X Funding, that fraudulently charged a “construction management fee” and that concealed that the true purpose of the fee was to pay for undisclosed AHFM costs, including warehouse line fees on construction loans.  The MK Financial invoices stated “[m]ake all checks payable to MK Construction” which falsely represented the funds would be used for construction related costs. They also caused false entries on the HUD-1’s making it appear that the housing manufacturer was paying the construction management fee outside of the closing when the fee was actually included in the borrower’s purchase price and ultimately rolled into the loan. These invoices and false statements were concealed from HUD and the borrowers.

Between July 6, 2011 and September 10, 2014, Kergosien and Wu caused title companies to issue checks to MK Financial/MK Construction resulting in fraudulent payments of approximately $1,117,581 on approximately 126 FHA insured loans for over $12M; and, between July 15, 2014 and September 10, 2015, to issue checks to 1X Funding, LLC resulting in fraudulent payments of approximately $1,062,416 on approximately 99 FHA insured loans for at least $3.8M.

On August 10, 2015, Housing Wire reported that HUD’s Mortgage Review Board had settled allegations that American Home Free Mortgage had artificially increased mortgage costs by an average of $12,000 per loan through illegitimate fees paid to a company owned and operated by its sales manager.  In that settlement, AHFM did not admit fault or liability but agreed to pay a civil money penalty of $169,419 along with the permanent withdrawal of its FHA approval.

Yelp’s page for American Home Free Mortgage reflects that the company is closed. It received only one review – 5 stars.

Ignacio Beato, 46, Hazleton, Pennsylvania, pled guilty before United States District Judge James M. Munley to conspiracy to engage in monetary transactions through a financial institution, with funds that were the proceeds of wire fraud. Beato is scheduled to be sentenced on August 31, 2017.

Beato, who was a licensed real estate agent, falsely represented to potential purchasers that he was authorized to sell vacant conventional and Federal Housing Administration insured mortgaged properties in Hazleton, Pennsylvania, when in fact, he did not have such authority. Between December 2013 and March 2015, Beato accepted $751,082 from individuals who believed they were purchasing properties. Beato then fraudulently converted that money to his own personal use.

The guilty plea was announced by United States Attorney Bruce D. Brandler of the United States Attorney’s Office for the Middle District of Pennsylvania. The case was investigated by the Internal Revenue Service, the Housing and Urban Development Office of the Inspector General, the Department of Homeland Security, the Pennsylvania State Police, and the Luzerne County District Attorney’s Office. Assistant U.S. Attorney Jenny P. Roberts is prosecuting the case.

Darlene Henderson, 60, Leesville, South Carolina, pled guilty and was sentenced in federal court in South Carolina, for Wire Fraud in connection with a mortgage fraud scheme. United States District Judge Joseph F. Anderson, Jr., of Columbia sentenced Henderson to eight months of home confinement, to be followed by five years of probation. Henderson also was ordered to pay almost $130,000 in restitution to the U.S. Department of Housing and Urban Development.

Evidence presented at the hearing established that between November 2011 and December 2013, Henderson assisted Michael Yant, who previously pled guilty to the same scheme and was sentenced to five months incarceration, commit mortgage fraud on a number of Federal Housing Administration (FHA) loans. Specifically, Yant engaged in a prohibited rent-to-own scheme, and Henderson used her position at the bank to approve these loans, despite suspicious borrower information being relayed to her. A number of these loans are now delinquent or in default.

United States Attorney Beth Drake announced the sentencing.  The case was investigated by the United States Department of Housing and Urban Development, Office of the Inspector General, the United States Postal Inspection Service, and the Federal Bureau of Investigation. Assistant United States Attorney Winston Holliday of the Columbia office prosecuted the case.

The United States filed a civil suit against the Rainy Day Foundation, Inc., a purported charitable “counseling fund,” together with its associated business entities and principals.  The case was filed federal court in Central Islip, New York and has been assigned to United States District Judge Joseph F. Bianco.

The complaint alleges that in at least 865 instances, the Rainy Day Foundation, together with five Eastern District of New York-based mortgage lenders and their principals, defrauded the United States and various banks insured by the Federal Deposit Insurance Corporation (“FDIC”), resulting in millions of dollars of mortgage losses, and requiring the United States to pay over $5,605,237 in false claims. Continue Reading…