The former president of a company that went out of business after losing its approval to originate and securitize government mortgages has pled guilty to running a scheme that diverted loan funds to cover company operating expenses.
The Department of Housing and Urban Development withdrew Federal Housing Administration approval for Ideal Mortgage Bankers in November 2009. In addition, it lost its approval as an issuer of Ginnie Mae mortgage-backed securities.
The Melville, N.Y.-based firm operated as Lend America and Lending Key.
At the time, HUD attributed the decision to a host of alleged FHA violations including the approval of unqualified loans, inadequate documentation and the omission of borrowers’ liabilities. In addition, HUD said that employee loans were made outside of HUD’s guidelines, and a false annual certification was submitted by the company.
A lawsuit filed by the government in October 2009 alleged Lend America’s executive vice president and chief business strategist, Michael Ashley, masterminded the scheme to defraud HUD.
Unable to originate FHA loans, the company was out of business by December 2009.
A few months later, Ashley was hit with a consent judgment permanently banning him from originating, underwriting or submitting any FHA loans.
On Wednesday, HUD announced the immediate suspension of Lend America’s former president, Michael Primeau.
The agency noted that the FHA suspension follows a guilty plea by Primeau that he directed employees to divert refinance proceeds that were supposed to pay off the old loans to accounts where they could be used to pay company operating expenses.
The story is similar to the Taylor Bean and Whitaker Mortgage Corp. saga.
Taylor Bean was suspended by HUD in August 2009, while Ginnie said it was “defaulting and terminating” Taylor Bean as an issuer of its MBS. That was immediately followed by Freddie Mac’s termination of the company and the suspension by Taylor Bean of its own business. The Ocala, Fla.-based firm was bankrupt by the end of that month.
Turns out Taylor Bean founder and former chairman Lee Bentley Farkas was working in collusion with his employees and executives at his warehouse lender and bank, Colonial Bank, to hide company losses by operating an overdraft scheme and financing bogus mortgages. Farkas was sentenced this past June to 30 years in prison. Other defendants in the case have received prison sentences ranging from three months to 96 months.
