Thanks to a chaotic distressed loan marketplace, criminals are seizing opportunities to deceive mortgage servicers and line their own pockets. Servicers are being misled about the condition, maintenance and sale of distressed assets. Other recently active mortgage-related criminal cases include a mortgage broker who collected illegal up-front fees, a subprime lending employee who used mortgage fraud to increase his commissions and a registered broker-dealer who misled buyers and sellers of residential mortgage-backed securities.
Dean Counce, who pled guilty in September to providing fabricated inspection reports to mortgage servicers like Bank of America through his company American Field Services, was sentenced to 97 months in prison, according to a Feb. 20 announcement from the U.S. Attorney’s Office for the Middle District of Florida. A money judgment for $12,774,102 was entered against Counce, and he was ordered to forfeit his interest in real estate and jewelry.
Counce, who allegedly collected around $23 million in inspection fees from BofA between 2007 and 2012, started falsifying inspection reports when American Field’s Florida business volume exceeded its capacity as Florida foreclosures ballooned.
Lorraine Brown, the former owner and chief executive officer of DocX who has already agreed to a guilty plea with federal prosecutors, agreed to a one-count guilty plea with the state of Michigan, Michigan Attorney General Bill Schuette announced on Feb. 12. DocX was a foreclosure processing firm owned by Lenders Processing Services Inc. that was shut down by LPS after it was discovered that the unit used robo-signing in foreclosures across the country.
A plea agreement has been reached with federal prosecutors and Peter McDonough and Michael Renquist. The California residents, whose criminal case is pending in U.S. District Court for the Northern District of California, conspired with others limit bidding at public auctions to just one person then subsequently conduct private auctions — sometimes right on the courthouse steps — open only to members of the conspiracy. The fraudulent foreclosure auctions, which were held in Alameda County, diverted proceeds from property equity that would have gone to mortgage holders and others by holding second, private auctions.
Renquist was additionally charged with additional counts for his involvement in a similar scheme in Contra Costa County.
“The conspirators suppressed competition and lined their pockets through fraudulent and collusive conduct at the expense of lenders and distressed homeowners,” Bill Baer, assistant attorney general in charge of the Department of Justice’s Antitrust Division, said in the announcement.
Bid rigging at foreclosure auctions is a violation of the Sherman Antitrust Act of 1890.
Gilbert Chung agreed on Feb. 5 to plead guilty to a bid-rigging scheme at public real estate foreclosure auctions in Northern California, an announcement from the Department of Justice said. Felony charges were filed in U.S. District Court for the Northern District of California against Chung — who allegedly committed his crimes in 2010.
On Jan. 16, the Wayne County Prosecutor’s Office in Michigan announced that Samer Salami was charged with defrauding Fannie Mae and Freddie Mac. From 2007 until 2010, the real estate broker is accused of steering the secondary lenders to his firm’s offers on foreclosed properties while taking higher offers from real purchasers and pocketing the difference.
More than $1.2 million in up-front fees were collected by mortgage broker Kenneth J. Enrico between June 2011 and August 2012, according to the U.S. Attorney’s Office for the Northern District of Georgia. Enrico allegedly promised prospective homebuyers an approved loan with a 105 percent loan-to-value at a 4.99 percent rate in return for a $2,500 up-front fee.
Over 350 people paid the fee and were told they were approved for the program — though none actually received the promised financing or a refund. Consumers also lost additional fees they paid to Enrico as well as earnest money deposits. Enrico was indicted by a federal grand jury on Feb. 19 and arraigned on March 4.
Joel Blanford was a sales representative at Long Beach Mortgage who was accused of defrauding his employer from 2003 until 2005 so that he could earn more commissions on closed loans. In all, the government claims he earned more than $1 million in commissions each during each of the three years. Blanford, who pled guilty in September 2012, was sentenced in February to 30 months in prison.
An indictment returned on Jan. 25 by a federal grand jury alleges that Jesse C. Litvak, a former registered broker-dealer and managing director at Jefferies & Co. Inc., misled buyers and sellers of RMBS about bid and ask prices then kept the difference for himself. Investors include federally insured banks that relied on capital from the Troubled Asset Relief Program — drawing the Special Inspector General for the Troubled Asset Relief Program into the investigation along with the Federal Bureau of Investigation.
Litvak, who was arrested at his New York home on Jan. 28, allegedly defrauded six Public-Private Investment Program funds and multiple private investment funds on more than $2 million in securities.
Frederick Darren Berg, who was sentenced in February 2012 to 18 years in prison for deceiving investors who dumped $245 million into his company, Meridian Group. In February, Berg made a filing with the court asking a federal judge to overturn the sentencing decision on the grounds that his court-appointed attorneys didn’t put up an adequate defense, the Seattle Times reported.
