July 7, 11

NEWS / Three Loan Officers and a Title Agent Charged in $2.5 Million Reverse Mortgage and Loan Modification

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida; Tony West, Assistant Attorney General for the Civil Division of the U.S. Department of Justice; John P. McCarty, Assistant Inspector General for Investigations (AIGI), U.S. Department of Housing and Urban Development; Jose A. Gonzalez, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division (IRS-CID); Henry Gutierrez, Inspector in Charge, U.S. Postal Inspection Service; John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office; and J. Thomas Cardwell, Commissioner, State of Florida’s Office of Financial Regulation, announced the unsealing of a criminal information charging four defendants for their participation in a $2.5 million Home Equity Conversion Mortgage (a.k.a. reverse mortgage) fraud scheme.

More specifically, defendants Louis Gendason, 42, of Delray Beach, Florida; Kimberly Mackey, 46, of Pittsburgh, Pennsylvania; John Incandela, 24, of Palm Beach, Florida; and Marcus Echevarria, 29, of Palm Beach, Florida, were charged with one count of conspiracy to commit wire fraud, in violation of Title 18, United States Code, Section 1349. The defendants made their initial appearances in federal court earlier today. If convicted, the defendants each face a statutory maximum term of imprisonment of up to 30 years in prison and a maximum fine of $1,000,000.

A reverse mortgage allows borrowers, who were at least 62 years of age, to convert the equity in their homes into a monthly stream of income, or a line of credit. Unlike the traditional mortgage loan scenario, in which borrowers make monthly payments to a mortgage lender in satisfaction of their outstanding loan, in a reverse mortgage loan scenario, the mortgage lender purchases borrowers’ equity and makes installment payments to the borrower. According to the Information, from May 2009 through November 2010, the defendants engaged in a reverse mortgage scheme that defrauded unwitting borrowers, Genworth Financial Home Equity Access, Inc. (Genworth), and the Federal Housing Authority (FHA).

The Information alleges that defendants Gendason, Incandela, and Echevarria worked at 1st Continental Mortgage (1st Continental), with offices in Fort Lauderdale and Boca Raton, Florida. The defendants, as loan officers for 1st Continental, solicited individuals, ages 62 and older, from around the country to refinance their existing mortgages with a reverse mortgage loan financed by Genworth, located in Rancho Cordova, California. To qualify the borrowers for the loans, Gendason allegedly altered real estate appraisals to fraudulently inflate the value of the borrowers’ properties. In fact, however, none of the borrowers had sufficient equity in their properties to qualify for a reverse mortgage. The defendants then submitted the fraudulently inflated appraisals to Genworth. Based on the false documentation, Genworth approved and the FHA insured more than $2,572,813 in reverse mortgage loans.

As a further part of the conspiracy, defendant Kimberly Mackey, a licensed title agent and proprietor of Real Estate One Land Services, Inc. (REO), located in Pittsburgh, Pennsylvania, fraudulently closed the Genworth loans, failing to pay off the borrowers’ existing mortgage loans. Genworth wired the loan proceeds to Mackey as the designated closing agent for 1st Continental. Mackey attempted to conceal the fraudulent loan closings by preparing false HUD-1 settlement documents that showed that the existing mortgages had, in fact, been paid off. Between May 2009 and November 2010, Mackey received loan proceeds from Genworth totaling $2,572,813.19. Mackey fraudulently diverted at least $988,086.33 to a bank account controlled by Incandela and Gendason, who along with Echevarria, used this money for their personal benefit.

Thereafter, to perpetuate the fraud, the defendants allegedly engaged in a loan modification scheme to conceal the existence of the Genworth reverse mortgage transactions from the original mortgage lenders, whose loans remained unpaid. To this end, Gendason, Incandela, Echevarria and Mackey conspired to create fictitious offers to buy some of the borrowers’ properties, in the form of “short sales.” A short sale is a sale of real estate in which the sale proceeds are less than the balance owed on the loan to the mortgage lender, but avoids foreclosure and related costs. In other instances, to hide the existence of the Genworth reverse mortgage loan from the original lenders, the defendants made monthly mortgage payments to the borrowers’ original lenders.

U.S. Attorney Wifredo Ferrer stated, “These defendants preyed on senior citizens on fixed and modest incomes. While legitimate loan modifications and reverse mortgages are useful tools to help those who need it, we will remain vigilant to make sure these tools are not misused by those who seek to line their own pockets. We urge potential borrowers to use caution when entrusting their homes and savings to those offering financial alternatives, including loan modifications and reverse mortgages.”

“Protecting Americans from financial fraud is one of our top priorities,” said Tony West, Assistant Attorney General of the Civil Division of the Department of Justice. “With these charges, we are taking another important step in the effort we began with Operation Stolen Dreams by holding accountable those whom we believe lined their own pockets with money that should have gone to help vulnerable seniors.”

“Today’s charges reflect the ongoing interagency effort between federal and state law enforcement and the regulatory community to combat mortgage fraud,” said John P. McCarty, Assistant Inspector General for Investigations (AIGI) of the Department of Housing and Urban Development. “Most importantly, it confirms HUD-OIG’s commitment to aggressively investigate those who victimize America’s senior citizens through reverse mortgage fraud. Anyone with knowledge of such schemes is encouraged to contact our HUD hotline at 1-800-347-3735.”

IRS-CID Special Agent in Charge José A. Gonzalez stated, “By following the money trail, we were able to determine that these defendants personally benefitted from this fraud. The American public should have confidence that IRS Criminal Investigation will continue to utilize its financial investigative expertise to uncover and assist our law enforcement partners in prosecuting attacks on our financial system and on our elderly.”

“This investigation illustrates the diversity of a mortgage scammer’s reach. It also demonstrates law enforcement’s determination to protect our elderly citizens from these unlawful financial deceptions,” said Henry Gutierrez, Inspector in Charge, U.S. Postal Inspection Service, Miami Division.

“Combating mortgage fraud is a priority due to the impact of lending and the housing market on the nation’s economy,” said John V. Gillies, Special Agent in Charge for the FBI Miami. The FBI remains committed to working with our law enforcement partners to routing out this type of fraud.”

“The Florida Office of Financial Regulation is pleased to join in the efforts of state and federal law enforcement and regulatory partners to combat fraud in our state,” said OFR Commissioner Tom Cardwell. “I commend the hard work of those who have contributed to this investigation.”

Mr. Ferrer commended the investigative efforts of HUD-OIG, IRS-CID, the U.S. Postal Inspection Service, the FBI, and the Florida’s Office of Financial Regulation. Mr. Ferrer also thanked the U.S. Secret Service and Genworth Financial Home Equity Access, Inc for their assistance in this investigation. The case is being prosecuted by Assistant U.S. Attorneys Jeffrey H. Kay and Thomas Lanigan, and Kevin J. Larsen, a Trial Attorney for the Department of Justice’s Office of Consumer Protection Litigation.

An information is only an accusation, and a defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

http://www.fbi.gov/miami/press-releases/2011/three-loan-officers-and-a-title-agent-charged-in-2.5-million-reverse-mortgage-and-loan-modification-scheme

Tags: document, criminal investigation,