One criminal defendant in a huge secondary marketing case pleaded guilty while another chose to face a jury. A Texas loan correspondent had no luck convincing an appeals court to reverse a judgment enforcing a repurchase demand.
The former servicing manager of U.S. Mortgage, Leroy Hayden, pleaded guilty to one count of wire fraud, the U.S. Department of Justice reported. The plea was tied to a $136 million secondary marketing fraud scheme. He faces sentencing on Sept. 27.
Hayden worked at the company from 2004 until January 2009. He allegedly conspired with U.S. Mortgage president Michael J. McGrath Jr. and several other people to fraudulently sell mortgages to Fannie Mae that belonged to other credit unions. McGrath, who was scheduled for sentencing this month, pleaded guilty in June 2009 and admitted to the fraudulent sale of hundreds of loans in order to prop up his own company and make investments.
Fake reports were provided to credit unions indicating that they still owned the loans, the news release said. Hayden changed data in the company’s servicing system to hide the fraud.
Just weeks after a Jan. 27, 2009, raid by dozens of law enforcement agents, Pine Brook, N.J.-based U.S. Mortgage and subsidiary CU National Mortgage LLC were forced into bankruptcy.
Lee Bentley Farkas, former chairman of failed Taylor, Bean and Whitaker Mortgage Corp., pled not guilty on July 2 in U.S. District Court for the Eastern District of Virginia. Farkas is accused of conspired to misappropriate more than $0.4 billion from Colonial Bank’s warehouse lending division.
Farkas, who was arrested last month, requested a jury trial. The case has been continued to Nov. 1.
Freddie Mac filed opposition to a Motion for an Order Authorizing and Directing Examination that was filed by Bank of America in the U.S. Bankruptcy Court for the Middle District of Florida Jacksonville Division. The filing was made in the Taylor Bean bankruptcy case.
Freddie claims it would cost at least $10 million to provide the discovery data requested by BofA. The requests reportedly equate to 1 billion pages of documents and 32 terabytes of data.
“Indeed, the information requested by BoA includes at least 12 witnesses associated with Freddie Mac, as well as eight years’ worth of documents relating (according to the debtor) to over 295,000 mortgages,” Freddie said.
The Court of Appeals of Texas, Fourteenth District, Houston, denied an appeal by Home Loan Corp., which does business as Expanded Mortgage Credit, according to the opinion posted at Leagle.com. The appeal sought to overturn a lower court’s summary judgment in favor of JPMorgan Chase Bank, N.A.
After three loans defaulted on April 1, 2007, Houston-based Home Loan refused to repurchase the loans as demanded by Chase because the loans hadn’t become 30 days past due. Chase filed a breach-of-contract claim alleging Home Loan violated representation, warranty and covenant provisions in the Mortgage Loan Purchase, Sale and Interim Services Agreement. Chase claims that Home Loan knew the mortgagors for two of the loans had not made on-time payments during either January or February 2007.
Chase’s move for a summary judgment was granted, and Chase was awarded damages of $953,358 and attorney’s fees of $44,000.
“We affirm the trial court’s judgment,” the appeals court opinion said.
United States of America v. Lee Bentley Farkas, Defendant.
Criminal No. 1:10cr 200 (U.S. District Court for the Eastern District of Virginia).
HOME LOAN CORPORATION D/B/A EXPANDED MORTGAGE CREDIT, Appellant v. JPMORGAN CHASE BANK, N.A., Appellee.
Case No. 14-09-00119-CV, Opinion filed April 29, 2010 (Court of Appeals of Texas, Fourteenth District, Houston).
In re. Taylor, Bean & Whitaker Mortgage Corp., Debtor.
Case No. 3:09-bk-07047-JAF (U.S. Bankruptcy Court for the Middle District of Florida Jacksonville Division).
