Four Charged in $2.5 Million Reverse Mortgage Fraud Scheme

Four defendants were charged Wednesday for their roles in a $2.5 million Home Equity Conversion Mortgage fraud scheme. The U.S. Attorney’s Office for the Southern District of Florida reports that three of the defendants, Louis Gendason, John Incandela, and Marcus Echevarria, worked at 1st Continental Mortgage in Florida as loan officers; the fourth defendant, Kimberly Mackey, worked as a licensed title agent and proprietor of Real Estate One Land Services, Inc., in Pennsylvania.

These individuals allegedly worked together in a scheme to defraud reverse mortgage borrowers, lender Genworth Financial Home Equity Access, Inc., and the Federal Housing Authority (FHA); if convicted, they will each face up to 30 years in prison and fines of up to $1 million.

The three defendants who worked for 1st Continental are charged with soliciting homeowners aged 62 or older to refinance existing home mortgages with reverse mortgages, even if those individuals did not qualify for a reverse mortgage. Gendason allegedly altered home appraisals to inflate the values of the properties so that the seniors would qualify, and these fraudulent appraisals were submitted to Genworth. Genworth subsequently approved the falsified documents, and the FHA insured more than $2,572,813 in unqualified reverse mortgage loans.

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Mackey, the fourth defendant, allegedly played a role in the scheme by closing the Genworth loans without paying off the defrauded borrowers’ existing mortgage loans. Then, as the designated closing agent for these loans, Mackey received $2,572,813.19 in loan proceeds from Genworth, of which she funneled $998,086.33 into a bank account controlled by Incandela and Gendason; this money was used by Incandela, Gendason, and Echavarria for personal use, according to the U.S. Attorney’s Office. In order to conceal the fraudulent loan closings, Mackey prepared false HUD-1 settlement documents to the effect that the loans had been closed.

Meanwhile, the unsuspecting homeowners’ original mortgage loans remained open and unpaid, and the defendants allegedly tried to hide the existence of the refinanced reverse mortgage loans from the original mortgage lenders. In order to do this, the 1st Continental employees created fictitious offers for “short sales” on the borrowers’ homes.

U.S. Attorney Wifredo Ferrer, along with several other figures of authority, recently unsealed criminal information relating to the alleged fraud.

“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 Ferrer. “We urge potential borrowers to use caution when entrusting their homes and savings to those offering financial alternatives, including loan modifications and reverse mortgages.”

“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.”

Written by Alyssa Gerace

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  • Unfortunately, the reverse mortgage scams are going around. On a brighter note, Apple even released an iPhone app a few days ago called Scam Detector. The app exposes in detail over 350 of the most notorious scams in the world. Lots of them are real estate scams. It might be worth checking it out, if you have an iPhone…The app it’s kinda cool, actually.

  • When did the fraud occur?  In light of the CFPB study, the timing could not be worse.  Hopefully the fraud occurred before the HUD appraisal rules went into effect.

      • Ayssa, thank you.  The issue still stands if the charges are true and the dates correct as published.  The rest of this comment assumes that the general facts are true as presented.
         
        treverse is right.  How could this happen?  Since a portion of this activity occurred after 9/30/2010 where was the supervision of Genworth?  How could appraisals be changed by a correspondent after implementation of ML 2009-28 on applications which received case number assignments after February 15, 2010?  If any of these HECMs received case number assignments after that date, what does this say about mortgagee supervision generally on both appraisal oversight and general oversight of TPOs?  How many other lenders was this TPO supervised by?
         
        How the HUD OIG finds against Genworth will send a definite message to mortgagees.  The HUD OIG must show that it will not tolerate this kind of situation at any level and that it will root out and punish those who participate in such activities and those who fail to establish proper controls, fail to monitor them, and fail to take appropriate action; failure in the control area should result in the sharing of guilt and punishment with the perpetrators at the lender level — for the lender itself and those responsible for controls at the lender including the ultimate control setter, its CEO.  Either controls are an exercise in vanity or their requirements provide the teeth needed for the HUD OIG to rip into lax lender supervision. 
         
        Here is the chance for the HUD OIG to weigh in on the merits of ML 2010-20.  Will the industry be better or more poorly supervised as a result of this abandonment of HUD for supervising former correspondents and other TPOs?  Did HUD abandon the HERA mandate of Section 2122(a)(9) now codified in 12 USC 1715z-20(n)(2) which requires HUD to approve “all parties which participant in the origination….”
         
        What this correspondent and lender allowed to take place hurts not only themselves but the reputations of us all.  Whether this correspondent had a tarnished prior record or not, the HUD OIG must take a strong stand regarding lenders which take on former correspondents and other TPOs with tarnished records.  
         
        If the charges are true, there is no room in the industry for this type of sloppy oversight and slimy operations.  The ball is now in the hands of the HUD OIG.  This case will set the tone for what is to come.

  • This doesn’t make sense. How were appraisals altered? Did Genworth let them submit appraisals from their own appraiser’s? If so Genworth should be on the hook for this.

    How did these idiots ever think they would get away with this? Now they are facing 30 years for what seems like very little cash. They deserve what they get.

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