Two Individuals Sentenced in Connection with $2.5 Million Reverse Mortgage and Loan Modification Scheme
WASHINGTON – Two individuals – a loan officer and a title agent – have been sentenced by U.S. District Court Judge William P. Dimitrouleas in Ft. Lauderdale, Fla., for their participation in a nationwide $2.5 million reverse mortgage fraud scheme, the Justice Department announced today.
Kimberly Mackey, 47, of Pittsburgh, was sentenced to 60 months in prison, five years of supervised release and ordered to pay more than $1.6 million in restitution. Marcos Echevarria, 29, of Palm Beach, Fla., was sentenced to 24 months in prison, five years of supervised release and ordered to pay more than $1.6 million in restitution. Louis Gendason, 42, of Delray Beach, Fla., and John Incandela, 24, of Palm Beach are scheduled to be sentenced on Dec. 16, 2011.
A reverse mortgage, also known as a Home Equity Conversion 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. 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 the August 2011 hearing in the case, from May 2009 through November 2010, the defendants engaged in a reverse mortgage scheme that defrauded unwitting borrowers, Genworth Financial Home Equity Access Inc., and the Federal Housing Administration (FHA). Working as loan officers, Incandela and Echevarria solicited seniors to refinance their existing mortgages with a reverse mortgage loan financed by Genworth. To qualify the borrowers for these loans, a third defendant, 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 $2.5 million in reverse mortgage loans.
As part of the scheme, Mackey, a licensed title agent, fraudulently closed the Genworth loans and did not pay off the borrowers’ existing mortgage loans. Mackey attempted to conceal the fraudulent loan closings by preparing false settlement documents that showed that the existing mortgages had, in fact, been paid off. The defendants divided up the loan proceeds and used the money for their personal benefit.
The defendants further 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.
The sentences were announced by Tony West, Assistant Attorney General for the Justice Department’s Civil Division; Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida; 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 (IRS-CI); Henry Gutierrez, Inspector in Charge, U.S. Postal Inspection Service; John V. Gillies, Special Agent in Charge, FBI, Miami Field Office; and J. Thomas Cardwell, Commissioner, State of Florida’s Office of Financial Regulation.
“These defendants orchestrated a mortgage fraud scheme targeting some of the most vulnerable and valuable members of our community – our elders,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “The court’s stiff sentences reflect the seriousness of their crime and the Justice Department’s resolve to fight financial fraud perpetrated against consumers.”
The case was investigated by HUD-OIG, IRS-CI, the U.S. Postal Inspection Service, the FBI and the Florida’s Office of Financial Regulation, with assistance from the U.S. Secret Service and Genworth Financial Home Equity Access. The case was prosecuted Kevin J. Larsen, a Trial Attorney in the Justice Department’s Consumer Protection Branch, and Assistant U.S. Attorneys Jeffrey H. Kay and Thomas Lanigan.