CHARGES BROUGHT IN ALLEGED REVERSE MORTGAGE/LOAN MODIFICATION FRAUD SCHEME

The following is an excerpt from the Department of Justice website:

"Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE Wednesday, July 6, 2011
Coinciding with One-Year Anniversary of “Operation Stolen Dreams,” Three Loan Officers and a Title Agent Charged in $2.5 Million Reverse Mortgage and Loan Modification Scheme
WASHINGTON – The Justice Department announced today the unsealing of a criminal information earlier today, charging four defendants – Louis Gendason, 42, of Delray Beach, Fla.; Kimberly Mackey, 46, of Pittsburgh; John Incandela, 24, and Marcos Echevarria, 29, both of Palm Beach, Fla. – with conspiracy to commit wire fraud involving a nation-wide reverse mortgage scam that defrauded elderly borrowers, financial institutions and the Department of Housing and Urban Development (HUD). A reverse mortgage allows borrowers, who are at least 62 years of age, to convert the equity in their homes into a monthly stream of income, or a line of credit. Three of the defendants made their initial appearances at the federal courthouse in Fort Lauderdale, Fla., earlier today. If convicted, the defendants each face a statutory maximum term of up to 30 years in prison and a fine of up to $1 million. These charges coincide with the one-year anniversary of “Operation Stolen Dreams,” the department’s anti-mortgage fraud enforcement initiative announced by Attorney General Eric Holder last June.

These latest charges demonstrate the department’s continued commitment to the identification and eradication of mortgage fraud. The scheme charged today contains many of the characteristics common to mortgage fraud around the country. The information charges Louis Gendason, John Incandela and Marcos Echevarria with using a Florida-based loan modification business known as Lower My Debts.com L.L.C. as a front to identify elderly borrowers who were financially-vulnerable. They are alleged to have in their capacity as loan officers at 1st Continental Mortgage LLC. solicited borrowers to refinance their existing mortgages with a reverse mortgage loan financed by Genworth Financial Home Equity Access Inc. To induce Genworth and HUD to fund and insure the reverse mortgage loans, the defendants allegedly changed the unwitting borrowers’ real estate appraisal reports to fraudulently represent equity in the properties. The information alleges that Gendason, Incandela and Echevarria originated fraudulent loans on properties located in seven different states between May 2009 and November 2010 exceeding $2.5 million.

As a further part of the charged conspiracy, a fourth defendant, Kimberly Mackey, a licensed title agent and proprietor of the Pittsburgh title agency Real Estate One Land Services Inc., fraudulently closed the Genworth loans by failing to pay off the seniors’ existing liens. Instead, Mackey wired nearly $1 million in Genworth loan proceeds to the business checking account for Lower My Debts.com. She conspired to conceal the fraudulent loan closings from financial institutions by preparing written settlement documents which falsely represented that the borrowers’ existing mortgages had, in fact, been paid off. In some instances, after Mackey wired the loan proceeds to bank accounts in Florida controlled by her co-conspirators, she is alleged to have assisted them with defrauding the banks holding the borrowers’ first mortgages by negotiating fake short sales. This was designed to induce these banks to release their valid liens on the seniors’ properties at a fraction of their existing loan balance. All of the defendants are accused of pocketing the illegally-obtained loan proceeds.

“Protecting Americans from financial fraud is one of our top priorities,” said Tony West, Assistant Attorney General of the Justice Department’s Civil Division. “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.”

“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,” said Wifredo Ferrer, U.S. Attorney for the Southern District of Florida. “We urge potential borrowers to use caution when entrusting their homes and savings to those offering financial alternatives, including loan modifications and reverse mortgages.”

This case was investigated by agents from the HUD-Office of Inspector General; the Internal Revenue Service-Criminal Investigation; the U.S. Postal Inspection Service; the FBI Miami Field Office; and the state of Florida’s Office of Financial Regulation. The case was prosecuted by Trial Attorney Kevin J. Larsen from the Civil Division’s Office of Consumer Protection Litigation, along with Assistant U.S. Attorneys Jeffrey H. Kay and Thomas P. Lanigan from the U.S. Attorney’s Office for the Southern District of Florida.

Initiated in June 2010, Operation Stolen Dreams targeted mortgage fraudsters throughout the country and was the largest collective enforcement effort ever brought to bear in confronting mortgage fraud. The operation was organized by the Mortgage Fraud Working Group of President Obama’s interagency Financial Fraud Enforcement Task Force, which was established to lead an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The President’s Financial Fraud Enforcement Task Force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. Operation Stolen Dreams targeted 1,517 criminal defendants nationwide, included 525 arrests, and involved an estimated loss of more than $3 billion.

The operation also resulted in 191 civil enforcement actions and the recovery of more than $196 million. Combating mortgage fraud continues to be a primary focus of the Civil Division. Since the end of Operation Stolen Dreams last June, Civil Division attorneys have continued to vigorously pursue mortgage fraud cases throughout the country, working with our partners in the U.S. Attorneys’ Offices and various federal agencies, specifically including HUD."

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