On July 14, 2015, the U.S. Attorney for the Southern District of Florida announced that the owner of a Miami-area mortgage company, his business partner, and a senior mortgage underwriter each pleaded guilty to conspiracy to commit wire fraud affecting a financial institution. As part of the owner’s plea, he will forfeit $8 million, which is equal to his profits from the scheme. Charges were brought in the United States District Court for the Southern District of Florida by the Department of Justice (“DOJ”) and its Criminal Division’s Fraud Section. The investigation was headed by the Miami Field Office for the U.S. Department of Housing and Urban Development Office of Inspector General (“HUD-OIG”).
The mortgage company specialized in mortgage loans insured by the Federal Housing Administration (“FHA”). Defendants admitted that, although a majority of the company’s clients did not qualify for FHA loans, the owner and his business partner directed company employees to falsify documents in order to make the borrowers appear qualified. For example, employees were instructed to use false earnings statements and verifications of employment (“VOE”) to close loans. The underwriter responsible for reviewing the FHA loans also admitted that she provided employees with false information and endorsed loan applications despite the fact that she knew the borrowers did not qualify for FHA insurance. Defendants further admitted that the company offered cash back to borrowers after closing, yet failed to disclose this information as required by the FHA guidelines.
The mortgage company subsequently sold its fraudulent FHA loans to financial institutions. A majority of these loans defaulted, resulting in substantial losses to the FHA. DOJ estimates that defendants’ scheme caused at least $64 million in losses to the Federal Housing Administration (“FHA”).