Wednesday, November 25, 2015

Real Estate Operator Cops Guilty Plea For Role In Bay State Short Sale Leaseback Racket; Duped Banksters Into Taking 'Haircuts,' Releasing Mortgages At Discount While Believing Transactions Were Arms-Length Deals, Losing Million$

From the Office of the U.S. Attorney (Boston, Massachusetts):
  • A Methuen business executive pleaded guilty [] to participating in a conspiracy to defraud banks and mortgage companies by engaging in sham “short” sales of residential properties in the Merrimack Valley of Massachusetts.

    Dahianara Moran, 40, pleaded guilty to one count of conspiracy to commit bank fraud. U.S. District Court Judge Rya W. Zobel scheduled sentencing for Feb. 17, 2016.

    Moran conspired with others – including a Methuen loan officer and a Haverhill real estate agent who were not identified in the charging document – to defraud various banks via bogus short sales of homes in Haverhill, Lawrence and Methuen.

    A short sale is a sale of real estate for less than the value of any mortgage debt on the property. Short sales are an alternative to foreclosure that typically occur only with the consent of the mortgage lender, and that generally result in the lender absorbing a loss on the loan and releasing the borrower from the unpaid balance. By their very nature, short sales are intended to be arms-length transactions in which the buyers and sellers are unrelated, and in which the sellers cede their control of the subject properties in exchange for the short-selling bank’s agreement to release them from their unpaid debt.
    ***
    As part of the scheme, Moran and her co-conspirators submitted materially false and misleading documents to numerous banks in an effort to induce them to permit the short-sales – and thereby to release the purported sellers from their unpaid mortgage debts – while simultaneously inducing the purported buyers’ banks to provide financing for the deals. In fact, the purported sellers simply stayed in the homes, with their debt substantially reduced. In some cases, the conspirators then re-sold the properties in genuine arms-length transactions for a profit. Meanwhile, the short-selling banks lost millions of dollars.

    As part of the conspiracy:

    The conspirators falsely led banks to believe that the sales were arms-length transactions between unrelated parties, when in fact, the transactions were not arms-length, and the sellers retained control of (and frequently continued to live in) the properties after the sale. For example, Moran purported to sell two properties she owned to third parties who were, in fact, her close relatives, while actually maintaining control of both properties.

    The conspirators submitted phony earnings statements that Moran prepared in support of loan applications that they submitted to banks in order to obtain financing for the purported sales.

    The conspirators submitted phony HUD-1 Settlement Statements to banks, as well as to the Federal Housing Administration, that did not accurately reflect the disbursement of funds in the transactions. (A HUD-1 Settlement Statement is a standard form, developed by the U.S. Department of Housing and Urban Development, that is used to document the flow of funds in real estate transactions.HUD-1 Settlement Statements are required for all transactions involving federally related mortgage loans, including all mortgages insured by the Federal Housing Administration.)

    Hayacinth Bellerose, a real estate attorney from Dunstable, Mass., pleaded guilty last month to the same charge and is scheduled to be sentenced on Feb. 4, 2016.
For the U.S. Attorney press release, see Methuen Executive Convicted in Mortgage Fraud Conspiracy.

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