Tuesday, May 01, 2007

More On New Generation Funding, NYC Bangladeshi Mortgage Fraud Case

The New York City property flipping, mortgage fraud scam reported here last week involved the mortgage brokerage New Generation Funding, Bangladesh nationals and members of the New York City area Bangladeshi community who were recruited and paid $5,000 per deal to act as straw buyers. The scam ensnared legitimate mortgage lenders, including American Home Mortgage, Argent Mortgage, Long Beach Mortgage Company Fremont Investment and Loan, Aurora Loan Services, BNC Mortgage, Lehman Brothers Bank, Webster Bank, HSBC Bank, New Century Mortgage (R.I.P.), WMC Mortgage Company, GFI Mortgage Bankers, Inc., Alliance Mortgage Banking Corp., and Equifirst Corp.

The following individuals being criminally charged in Brooklyn Federal Court last week:
  • Mohitul Islam, Mohammed Zubair Hossain, Lalon Ahmed, Mohammed Jewel, Mehdi Hasan, Iqbal Hasan, Humayun Kabir, Togor ( last name unknown), Golam Bahauddin Sadi, and Mizanur Rahman.

The basis for the criminal complaint filed by authorities comes from information from an unnamed "confidential witness", identified as CW1, who was a partner in the mortgage fraud, who has already agreed to plead guilty, and has also agreed to "sing" to the Feds in exchange for a lesser sentence for his/her role in the scam. In addition, there are three additional unnamed confidential witnesses, CW2 and CW3 (both of whom have pleaded guilty to fraud charges in a related investigation and have agreed to "sing" to investigators in the hopes of getting lighter sentences), and CW4.

Red flags were raised when two of the victimized mortgage companies noticed high rates of default on the New Generation-originated mortgages; they subsequently found a fraudulent pattern of employment and income information when they audited the corresponding mortgage applications. At that point, the two mortgage companies called in law enforcement.

Described in the criminal complaint are undercover stings that are captured on video, involving confidential witness CW1 and an undercover FBI agent pretending to be a notary public and title closer at a simulated property sale closing.

One element of the alleged scam, as described in the criminal complaint, was the use of "short sales", in which the one member of the alleged conspiracy would negotiate a discounted payoff from the mortgage lender on a loan secured by a particular property controlled by the alleged fraud group. After successfully negotiating the "short pay" and re-taking control of the property for a fraction of what was owed, the property could then be resold to another straw buyer a significantly higher price, thereby "recycling" the property through the alleged fraud group's operation all over again.

For the full story (at least the version filed by the FBI Special Agent in the case), see the Criminal Complaint filed by Federal prosecutors, U.S.A. vs. Hossain, et al.

For media reports on this story, see:

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posted by Home Equity Theft Reporter at 4:08 AM