TWO LOAN OFFICERS AND A TITLE AGENT CHARGED IN $2.5 MILLION REVERSE MORTGAGE AND LOAN MODIFICATION SCHEME PLEAD GUILTY
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, Timothy A. Mowery, Special Agent in Charge, U.S. Department of Housing and Urban Development, Office of Inspector General (HUD-OIG), 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, announce today’‘s guilty pleas by defendants Louis Gendason, 42, of Delray Beach, FL; Kimberly Mackey, 46, of Pittsburgh, PA; and John Incandela, 24, Palm Beach, FL. The defendants were charged in a Criminal Information with one count of conspiracy to commit wire fraud, in violation of Title 18, United States Code, Section 1349, for their participation in a $2.5 million Home Equity Conversion Mortgage (a.k.a. reverse mortgage) fraud scheme. The remaining defendant, Marcos Echeverria, is scheduled to appear in court on August 10, 2011.
Sentencing for Gendason has been scheduled for November 8, 2011 at 1:15 PM before U.S. District Court Judge William P. Dimitrouleas. Sentencing for Mackey and Incandela has been scheduled for November 3, 2011 at 1:30 PM before U.S. District Court Judge William P. Dimitrouleas. At sentencing, the defendants face a maximum statutory term of imprisonment of up to 30 years’ imprisonment.
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 and statements made during today’s plea hearing, 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 Administration (FHA). Defendants Gendason and Incandela 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 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 used this money for their personal benefit.
Thereafter, to perpetuate the fraud, the defendants 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, 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.
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.
A copy of this press release may be found on the website of the United States Attorney's Office for the Southern District of Florida at http://www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the District Court for the Southern District of Florida at http://www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.