MORTGAGE FRAUD
Serge Gwabene
Acccording to Haverkamp (2021), Mortgage fraud has become more prevalent over time, and it's defines as "any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan." By that definition, such fraud can clearly be committed by both lenders and applicants, even though the latter may not think their misrepresentations or omissions are significant enough to be a concern.
I have chosen the recent case of Isaac DePaula, 41, who according to the Department of Justice (2021) pleaded guilty before U.S. District Judge Esther Salas in Newark federal court to Count 1 of an indictment charging him with conspiracy to commit bank fraud. DePaula was a long-time fugitive who was charged by criminal complaint in 2012 and by indictment in 2016. He returned to the United States in March 2020 to face the charges in the indictment. The history of the mortgage Industry has been shaken since the last economic crisis with Upheaval in housing markets, homeowners facing foreclosure and unscrupulous persons looking for easy money all contribute to a climate in which mortgage fraud may occur.
The mortgage Fraud of DePaula operated with his conspirators engaging in a long-running, large-scale mortgage fraud conspiracy through a mortgage company called Premier Mortgage Services (PMS). The conspirators targeted properties in low-income areas of New Jersey. After recruiting straw buyers, the defendants used a variety of fraudulent documents to make it appear as though the straw buyers possessed far more assets, and earned far more income, than they actually did. The defendants then submitted these fraudulent documents as part of mortgage loan applications to financial institutions. Relying on these fraudulent documents, financial institutions provided mortgage loans for the subject properties.
There were many things that could have been done inherent weakness such as segregation of duties were not present. In addition, there was a lack of separation of functions. These redflags could have alerted the management to take action.
Reference
https://www.justice.gov/usao-nj/pr/loan-officer-admits-participation-large-scale-mortgage-fraud- scheme
https://www.mortgageloan.com/mortgage-fraud/about#Understanding-Mortgage-Fraud-list-of- common-frauds