In 2010, federal and state law enforcement targeted mortgage fraud scams as part of "Operation Stolen Dreams," which lead to the indictments in the Southern District of New York of 55 defendants, who were allegedly involved in over $45 million in fraudulent loans. According to prosecutors, the defendants furthered their various scams through the use of:
- counterfeit documents to obtain loans;
- straw buyers with falsely inflated income and employment information;
- loans to purchase properties that did not exist, and
- bogus loan modification programs falsely promising Federal stimulus aid to distressed homeowners who were having difficulties meeting their mortgage payments.
These frauds targeted numerous financial institutions and hundreds of ordinary homeowners, and yielded over $29 million in fraudulent loans.
On June 17, 2010, 38 defendants were indicted in eight separate cases. Among those charged are three lawyers, seven mortgage brokers, three real estate agents, and two loan officers. In one of those cases,United States v. Jaime Cassuto, et al., defendants JAIME CASSUTO, 40, Seaford, NY; DAVID CASSUTO, 36, Massapequa, NY, 30; and ISAAK KHAFIZOV, 23, Howard Beach, NY, principals of American Home Recovery ("AHR") - a purported mortage modification company that they founded in the spring of 2008 in Manhattan, NY - were initially charged with one count of conspiracy to commit mail and wire fraud in connection with a mortgage modification scam.
AHR: Case in Point
Prosecutors alleged that at the defendants' direction, AHR salespeople sent unsolicited letters and emails to homeowners who were having difficulty making their mortgage payments. Those communications offered AHR's assistance in securing loan modifications, and noted that the company had a 98% success rate in this regard. For a supposedly refundable fee if unsuccessful, AHR represented to the homeowners that it:
- could get them better interest rates and lower monthly fees, all within a short timeframe;
- would return the up-front fees if it did not succeed in getting the homeowners the mortgage modifications they desired;
- had arranged for "pre-approved" mortgage modifications for the homeowners by their lenders;
- was affiliated with government agencies and programs established by the Economic Stimulus Act of 2008;
- possessed special expertise in mortgage modifications, and
- had special relationships with lenders.
After collecting hundreds of thousands of dollars in fees, AHR allegedly did virtually nothing to renegotiate the homeowners' mortgages - in some cases, not even contact the banks holding the mortgages. In the rare occurrence of a homeowner obtaining a mortgage modification, such was typically achieved after coaching to lie about income and assets. Needless to say, the promised fully-refundable fees were not refunded. In furtherance of its apparently predatory scam, in June 2009, AHR transferred all of its hundreds of unfulfilled mortgage modification orders to another individual for collection. Adding insult to injury, many of the clients went into foreclosure.
The three defendants were initially charged with one count of conspiracy to commit both mail and wire fraud as a result of allegations that they had defrauded over 240 homeowners out of approximately $500,000 in fees. The counts were increased following the issuance of a Superseding Indictment.
On April 2, 2012, Jaime Cassuto and David Cassuto each pled guilty to multiple counts of fraud.
After a ten-day jury trial, on May 17, 2012, Khafizov was found guilty of conspiracy, mail fraud, and wire fraud. He faces a total maximum sentence of 80 years in prison.
Bill Singer's Comment
This morning, a lot of you will be glued to the television watching the launch of Facebook's IPO and its likely meteoric rise in the aftermarket. Elsewhere, folks will be watching the ongoing meltdown of the world's stock markets as Greece's financial mess continues to roil the stock markets. Still, many less fortunate just won't give a damn about Facebook or the Euro's plight because they're broke and have been so since the onset of the Great Recession. Among the detritus of that last financial collapse were many of the poor homeowners who were evicted when they could no longer pay their mortgages. Of course, we'll leave for another day whether many of those folks should have been living in homes that they could barely afford or should never have been approved for in the first place.
This AHR case should be a stark reminder to all of you. The chaos that started with FNMA, furthered by unscrupulous lending practices, fueled by wannabe homeowners taking on more than they should have, and then exponentially skyrocketed by Wall Street's insatiable desire for product is still exacting its toll in 2012. Surely, Wells Fargo, Bank of America, Citigroup, and other large banks will be dealing with this fall-out for years to come. While the recent disclosures about MF Global or JP Morgan are interesting, they hardly invoke the sense of personal tragedy that one feels for the desperate homeowners victimized by the low life defendants in AHR.