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To update a story I wrote on May 29, 2008 (”Real Estate Fraud and the Real Estate Investor: Banks can be victims too!“), Omni Financial Services Inc., the bank holding company for Omni National Bank, is now officially operating under a mandatory regulatory oversight plan put into place by the Federal Reserve Bank of Atlanta.

For anyone interested in diving deep into this one, here’s the exact text from the written agreement between the Federal Reserve Bank of Atlanta and Omni Financial Services, Inc.:

UNITED STATES OF AMERICA
BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D.C.

Written Agreement by and between

OMNI FINANCIAL SERVICES, INC.
Atlanta, Georgia

and

FEDERAL RESERVE BANK OF ATLANTA
Atlanta, Georgia

Docket No. 09-022-WA/RB-HC

WHEREAS, Omni Financial Services, Inc., Atlanta, Georgia (“Omni”), a registered bank holding company, owns and controls Omni National Bank, Atlanta, Georgia (the “Bank”), a national bank, and various nonbank subsidiaries;

WHEREAS, it is the common goal of Omni and the Federal Reserve Bank of Atlanta (the “Reserve Bank”) to maintain the financial soundness of Omni so that Omni may serve as a source of strength to the Bank;

WHEREAS, Omni and the Reserve Bank have mutually agreed to enter into this Written Agreement (the “Agreement”); and

WHEREAS, on March 16, 2009, the board of directors of Omni, at a duly constituted meeting, adopted a resolution authorizing and directing Stephen M. Klein to enter into this Agreement on behalf of Omni, and consenting to compliance with each and every provision of this Agreement by Omni and its institution-affiliated parties, as defined in sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as amended (the “FDI Act”) (12 U.S.C. §§ 1813(u) and 1818(b)(3)).

NOW, THEREFORE, Omni and the Reserve Bank agree as follows:

Capital Plan

1. Within 30 days of this Agreement, Omni shall submit to the Reserve Bank an acceptable written plan to maintain sufficient capital at Omni, on a consolidated basis, and the Bank, as a separate legal entity on a stand-alone basis. The plan shall, at a minimum, address, consider, and include:

(a) The consolidated organization’s and the Bank’s current and future capital requirements, including compliance with the Capital Adequacy Guidelines for Bank Holding Companies: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A and D of Regulation Y of the Board of Governors of the Federal Reserve System (the “Board of Governors”) (12 C.F.R. Part 225, App. A and D) and the applicable capital adequacy guidelines for the Bank issued by the Bank’s federal regulator;

(b) the adequacy of the Bank’s capital, taking into account the volume of classified credits, concentrations of credit, allowance for loan and lease losses (“ALLL”), current and projected asset growth, and projected retained earnings;

(c) the source and timing of additional funds to fulfill the consolidated organization’s and the Bank’s future capital requirements;

(d) supervisory requests for additional capital at the Bank or the requirements of any supervisory action imposed on the Bank by its federal regulator;

(e) the requirements of section 225.4(a) of Regulation Y of the Board of Governors (12 C.F.R. § 225.4(a)) that Omni serve as a source of strength to the Bank; and

(f) procedures for Omni to: (i) notify the Reserve Bank, in writing, no more than 30 days after the end of any quarter in which Omni’s consolidated capital ratios or the Bank’s capital ratios (total risk-based, tier 1 risk-based, or leverage) fall below the plan’s minimum ratios; and (ii) submit simultaneously to the Reserve Bank an acceptable written plan that details the steps Omni will take to increase its and the Bank’s capital ratios above the plan’s minimums.

Accounting Policies and Procedures

2. Within 30 days of this Agreement, Omni shall submit to the Reserve Bank acceptable written accounting policies and procedures for the consolidated organization that are designed to enhance the accounting controls over Omni’s books and records and to ensure the accuracy of Omni’s books and records, which shall, among other things include, but not be limited to:

(a) A separate general ledger system which shall track Omni’s assets and liabilities, and shareholders’ equity separately from the Bank’s; and

(b) segregation of and physical control over Omni’s assets separate and apart from the Bank’s assets.

Affiliate and Insider Transactions

3. (a) Omni shall take all necessary actions to ensure that the Bank complies with sections 23A and 23B of the Federal Reserve Act (12 U.S.C. §§ 371c and 371c-1) and Regulation W of the Board of Governors (12 C.F.R. Part 223) in all transactions between the Bank and its affiliates, including, but not limited to, Omni, and its nonbank subsidiaries. Omni shall maintain a written record of each transaction between Omni, its nonbank subsidiaries, and the Bank and make such record available for subsequent supervisory review.

(b) For the purposes of this paragraph, the terms: (i) “transaction” shall include, but not be limited to, the transfer, contribution, sale or purchase of any Bank asset, the direct or indirect payment of any Omni expense or obligation, the direct or indirect assumption of any Omni liability, the payment by the Bank of a management or service fee of any nature to Omni, or any extension of credit by the Bank to Omni, including overdrafts; and (ii) “extension of credit” shall be defined as set forth in section 215.3 of Regulation O of the Board of Governors (12 C.F.R. 215.3).

4. (a) Omni shall not, directly or indirectly, enter into, participate, or, in any other manner, engage in any financial transaction with any of Omni’s or the Bank’s current or former executive officers, directors, principal shareholders or related interest thereof without the prior written approval of the Reserve Bank.

(b) Any request for prior approval shall be accompanied by adequate documentation that provides details of each proposed transaction, including a full description of the proposal, the purpose(s) of the transaction, the amounts involved, the benefits to be derived by the Omni, the Bank, or the current or former executive officer, director, principal shareholder or related interest thereof and such other matters that may be pertinent to the proposed payment or transaction to assist the Reserve Bank’s review of each proposal.

(c) For the purposes of this paragraph, the terms: (i) “director,” “executive officer,” “principal shareholder,” and “related interest” shall be defined as set forth in section 215.2 of Regulation O of the Board of Governors (12 C.F.R. 215.2); and (ii) “financial transaction” shall include, but is not limited to: an extension of credit; the use of Omni’s credit card for personal expenses; the payment of money; the transfer, sale or purchase of any asset; a contract; or Omni’s payment of any obligation of Omni’s or the Bank’s current or former executive officers, directors, principal shareholders or related interest thereof. Notwithstanding the foregoing definition of “financial transaction,” for the purposes of this paragraph, “financial transaction” shall not include the payment of fees and salaries to executive officers and directors and the reimbursement of expenses provided that similar types and amounts of payments have previously been made and fully documented on Omni’s books and records.

Compensation

5. (a) Omni shall not, directly or indirectly, increase salaries, bonuses, or directors’ fees, or make any other payments, including, but not limited to, reimbursement of expenses or payment of indebtedness, to or on behalf of any of Omni’s directors or executive officers without the prior written approval of the Reserve Bank.

(b) Notwithstanding the provisions of this paragraph, Omni does not need to obtain the prior written approval of the Reserve Bank for the reimbursement of reasonable expenses that aggregate no more than $500 per month for each executive officer, provided that such reasonable expenses are incurred in performing routine duties, which have been adequately documented and reported on Omni’s books and records.

Dividends and Distributions

6. (a) Omni shall not declare or pay any dividends without the prior written approval of the Reserve Bank and the Director of the Division of Banking Supervision and Regulation of the Board of Governors (the “Director”).

(b) Omni shall not directly or indirectly take dividends or any other form of payment representing a reduction in capital from the Bank without the prior written approval of the Reserve Bank.

(c) Omni and its nonbank subsidiaries shall not make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank and the Director.

(d) All requests for prior approval shall be received by the Reserve Bank at least 30 days prior to the proposed dividend declaration date, proposed distribution on subordinated debentures, and required notice of deferral on trust preferred securities. All requests shall contain, at a minimum, current and projected information on Omni’s capital, earnings, and cash flow; the Bank’s capital, asset quality, earnings, and ALLL; and identification of the sources of funds for the proposed payment or distribution. For requests to declare or pay dividends, Omni must also demonstrate that the requested declaration or payment of dividends is consistent with the Board of Governors’ Policy Statement on the Payment of Cash Dividends by State Member Banks and Bank Holding Companies, dated November 14, 1985 (Federal Reserve Regulatory Service, 4-877 at page 4-323).

Debt and Stock Redemption

7. (a) Omni and any nonbank subsidiary shall not, directly or indirectly, incur, increase, or guarantee any debt without the prior written approval of the Reserve Bank. All requests for prior written approval shall contain, but not be limited to, a statement regarding the purpose of the debt, the terms of the debt, and the planned source(s) for debt repayment, and an analysis of the cash flow resources available to meet such debt repayment.

(b) Omni shall not, directly or indirectly, purchase or redeem any shares of its stock without the prior written approval of the Reserve Bank.

Compliance with Laws and Regulations

8. (a) In appointing any new director or senior executive officer, or changing the responsibilities of any senior executive officer so that the officer would assume a different senior executive officer position, Omni shall comply with the notice provisions of section 32 of the FDI Act (12 U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of Governors (12 C.F.R. §§ 225.71 et seq.).

(b) Omni shall comply with the restrictions on indemnification and severance payments of section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and Part 359 of the Federal Deposit Insurance Corporation’s regulations (12 C.F.R. Part 359).

Progress Reports

9. Within 30 days after the end of each calendar quarter following the date of this Agreement, the board of directors shall submit to the Reserve Bank written progress reports detailing the form and manner of all actions taken to secure compliance with the provisions of this Agreement and the results thereof, and a parent company only balance sheet, income statement, and, as applicable, a report of changes in stockholders’ equity.

Approval and Implementation of Plan, Policies, and Procedures

10. (a) Omni shall submit a written capital plan and accounting policies and procedures that are acceptable to the Reserve Bank within the applicable time periods set forth in paragraphs 1 and 2 of this Agreement.

(b) Within 10 days of approval by the Reserve Bank, Omni shall adopt the approved capital plan and accounting policies and procedures. Upon adoption, Omni shall promptly implement the approved plan and policies and procedures, and thereafter fully comply with them.

(c) During the term of this Agreement, the approved capital plan and accounting policies and procedures shall not be amended or rescinded without the prior written approval of the Reserve Bank.

Communications

11. All communications regarding this Agreement shall be sent to:

(a) Mr. Robert D. Hawkins
Assistant Vice President
Federal Reserve Bank of Atlanta
1000 Peachtree Street, N.E.
Atlanta, Georgia 30309-4470

(b) Stephen M. Klein
Chairman and CEO
Omni Financial Services, Inc.
Six Concourse Parkway, Suite 2300
Atlanta, Georgia 30328

Miscellaneous

12. Notwithstanding any provision of this Agreement, the Reserve Bank may, in its sole discretion, grant written extensions of time to Omni to comply with any provision of this Agreement.

13. The provisions of this Agreement shall be binding upon Omni and its institution- affiliated parties, in their capacities as such, and their successors and assigns.

14. Each provision of this Agreement shall remain effective and enforceable until stayed, modified, terminated, or suspended in writing by the Reserve Bank.

15. The provisions of this Agreement shall not bar, estop, or otherwise prevent the Board of Governors, the Reserve Bank, or any other federal or state agency from taking any other action affecting Omni, the Bank, any nonbank subsidiary of Omni, or any of their current or former institution-affiliated parties and their successors and assigns.

16. Pursuant to section 50 of the FDI Act (12 U.S.C. § 1831aa), this Agreement is enforceable by the Board of Governors under section 8 of the FDI Act (12 U.S.C. § 1818).

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the 16th day of March, 2009.

Signed by Stephen M. Klein
Chairman and CEO, Omni Financial Services, Inc.

Signed by Robert D. Hawkins
Assistant Vice President,
Federal Reserve Bank of Atlanta

According to the FDIC’s latest Summary of Deposits for Omni National Bank (June 30, 2008), the bank’s holding company, Omni Financial Services, Inc., had $846,839,000 in customer deposits in 10 offices spread across five different states (Georgia, Florida, Illinois, North Carolina, and Texas). Capital Bank, a subsidiary of Capital Bank Corporation, acquired Omni’s four branches in Fayetteville, North Carolina in mid-December, 2008.

Omni National Bank is now participating in the FDIC’s Transaction Account Guarantee Program. Under that program, through December 31, 2009, all of the Bank’s noninterest-bearing transaction accounts are fully guaranteed by the FDIC for the entire amount in the account.

Finally, according to numerous comments left here on FlippingFrenzy.com, many home owners and investors who became acquainted with Omni National Bank through Delroy Davy are still searching for answers and justice in their quest to recover from their business dealings with Delroy Davy.

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I recently received the below question from someone who reads one of my other blogs–KeepMyHouse.com. In short, without going into too much detail, I think Flipping Frenzy readers–especially those of you who closely follow Countrywide–might appreciate knowing about this:

Question: We are a disabled couple who had a serious re-model which had to be done—-we were Countrywide customers, and never late with a payment. They made us come back 4 times in 4 years to get the funds, and they falsified our income. (I have the documents.) Now, they are sending me notices of ‘intent to accelerate’ and will not tell me what will happen if I cannot pay them the entire amount. They knew we were on fixed incomes, but went ahead each time as if we had all the money in the world. What can I do to?

Answer: Without knowing more, it sounds like you may have a cause of action against Countrywide. I’m not an attorney, but you may want to speak with one about your situation.

If you do not pay and they accelerate the loan, that means you have to come up with the full unpaid principal balance plus delinquencies and costs. If you don’t pay; Countrywide can foreclose. Depending on what state you’re in, that can take the form of a judicial foreclosure or a non-judicial foreclosure. You should find out what the foreclosure laws are in your state and familiarize yourself with the timeline for these proceedings.

Another approach you can take is to hire a company to complete a fraud and predatory lending audit on your loan documents, income, etc. This will cost you some money up front, but if it proves what you expect it to, you can then use that information to contact Countrywide and hopefully secure a modification to truly affordable payments. This audit will also be advantageous should you need to pursue legal action or arbitrate a settlement. The “bad acts” and documentation supporting those bad acts will be important when an attorney is deciding whether or not you have a legitimate claim against Countrywide.

You can always take the inexpensive road first. Try qualifying for a loan modification by calling Countrywide.

Make sure you explain your financial situation and have your income and expenses available and organized before you call. The modification rules have changed a bit under the Obama Plan, so you might find yourself qualifying for help.

There are also some other programs that can help you reinstate and come current. Ask Countrywide when you call whether you can qualify for the HomeSaver Advance Program–a loan that can be used to cure delinquencies and reinstate. It won’t solve the payment problems if you can’t afford to make your monthly payment, but it may allow you to avoid an immediate foreclosure and give you some time to investigate other ways to keep your house.

What ever you decide, act quickly, there may be a temporary moratorium on foreclosures but that will not last forever.

The San Antonio, Texas, office of the Federal Bureau of Investigation (FBI) announced today the establishment of a telephone hotline to receive complaints from the public regarding allegations of real estate and mortgage fraud.

As Flipping Frenzy readers know all to well, the FBI considers mortgage fraud to be a significant and growing crime which often affects unknowing consumers, and which has a direct impact upon the overall economic health of the U.S. economy. The collapse of the subprime mortgage market, as well as the recent economic downturn, has been met with a corresponding increase in fraud and schemes connected to mortgages and related transactions. The establishment of the San Antonio hotline will aid the FBI and by providing a direct line of alert should mortgage fraud be suspected.

If you suspect real estate or mortgage fraud in the San Antonio area, call the fraud hotline at (210) 650-6777.

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Stefan M. Guerra, 30, of Lee’s Summit, Missouri, and Daryle A. Edwards, 37, and Leon T. Jones, 42, both of Olathe, Kansas., have pleaded guilty in separate appearances before a U.S. Chief District Judge for their roles in a $12.6 million mortgage fraud scheme that involved 25 residential properties in Lee’s Summit and Raymore, Mo.

Guerra, Edwards, and Jones each admitted to participating in a conspiracy to defraud mortgage lenders from June 2005 to May 2007. They are among more than a dozen scammers who were involved in buying and selling new homes in the Raintree and Belmont Farms subdivisions in Lee’s Summit and the Eagle Glen subdivision in Raymore.

According to court documents, buyers purchased the homes at inflated prices, obtaining mortgage loans by providing false information to mortgage lenders, then kept the extra proceeds. The buyers created shell companies for the purpose of receiving those kickbacks from the builder, with kickbacks reaching up to $125,000 on each house.

In total during the course of the conspiracy, mortgage lenders approved 25 loans totaling more than $12.6 million. From that total, buyers received approximately $2.3 million without the lenders’ knowledge.

Stefan Guerra, a former mortgage loan officer at Midwest Equity Mortgage, admitted that he was involved in the purchase of one property and acted as a broker on 11 other properties involved in the conspiracy. The loans on the 12 properties totaled more than $5 million.

Leon Jones admitted he purchased a property in Lee’s Summit as part of the conspiracy, a purchase that involved Stefan Guerra. Jones also admitted that he made material misrepresentations upon which the lender relied in making the mortgage loans totaling $509,000. From the purchase of this property, unbeknownst to the lender, Leon Jones received approximately $50,000.

For his part, Daryle Edwards admitted that he purchased a property in Lee’s Summit as part of the conspiracy, and that he made material misrepresentations upon which the lender relied in making the mortgage loans totaling $410,000. Edwards used a false Social Security number, a false address and false employment, and falsely claimed that he would occupy the property. Darlye Edwards also admitted that he made false representations regarding the use of loan proceeds; Edwards received a $76,600 check payable to DAECO Construction, Inc., a company owned by Edwards, which was not disclosed to the mortgage lender or to the title company.

Co-defendant Ronald E. Brown, Jr., 39, of Gladstone, MO, pleaded guilty in early January of this year, to his role in the conspiracy. Brown, a self-employed insurance agent doing business as The Brown Insurance Agency in Kansas City, Kansas, obtained insurance for the properties that were purchased. After purchasing two false Social Security numbers for $10,000, Brown used the false Social Security number to purchase three properties in Lee’s Summit. In each case, Brown made material misrepresentations upon which the lenders relied in making the mortgage loans, which totaled $1,339,700. From the purchase of these properties, unbeknownst to the lenders, Brown received a total of $279,426.

Under federal statutes, Stefan Guerra, Leon Jones and Daryle Edwards are each subject to a sentence of up to five years in federal prison without parole, plus a fine up to $250,000 and an order of restitution. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.

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When a then 65-year-old Brooklyn, New York, woman sought the assistance of a foreclosure rescue firm, instead of helping her refinance and save her home, the much maligned Home Savers Consulting Corp. sold her home from under her. To add insult to injury, insolvent IndyMac, which is now controlled by the Federal Deposit Insurance Corp., issued the bogus mortgage on the home.

Now, the 69-year-old woman–Waver Brickhouse–has to convince the FDIC that her mortgage payments shouldn’t include an additional $150,000 added on by mortgage fraud. From yesterday’s edition of The New York Times:

Mortgage Fraud Case Poses Federal Quandary

By MICHAEL POWELL

Waver Brickhouse, gray-haired and soft-spoken, has come undone twice during the nation’s housing crisis.

In 2005, she fell behind on her mortgage payments and turned to a so-called rescue firm, which, court papers allege, tricked her into signing away the deed to her Brooklyn home. She says the company, Home Savers Consulting, secretly sold her home, with the help of a mortgage from IndyMac Federal Bank, and ran up huge new debts.

Now broke, deeply embarrassed and facing the loss of her small row house in the Brownsville neighborhood, Ms. Brickhouse, 69, faces a new problem. She must convince the Federal Deposit Insurance Corporation, which last year took control of IndyMac, now insolvent, that her mortgage payments should not include at least $150,000 tacked on by fraud.

To assume these new costs, she says, would break her in two.

“I’m going to drown in debt,” says Ms. Brickhouse, a retired city parks department worker, shaking her head. “I feel like it’s just a matter of time until I’m on the street with my children.”

F.D.I.C. officials say that they have no desire to put Ms. Brickhouse on the street and that they want to work out affordable payment terms. But Ms. Brickhouse’s lawyers say that the F.D.I.C.’s writ cannot extend to holding her responsible for a fraudulently created mortgage, and they have refused to disclose her finances until the agency drops its claim for the $150,000.

“Our position is that the mortgage with IndyMac is toilet paper — it has no legal standing,” said her lawyer Rick Wagner, litigation director with Brooklyn Legal Services Corporation A. “The law for 200 years is that no title can arise from a fraudulent act.”

Ms. Brickhouse has sued Home Savers, and her case underscores the conundrum facing the F.D.I.C. as it wades through thousands of troubled mortgages it has inherited from failed banks, 40,000 from IndyMac alone.

Tasked with renegotiating mortgages and cautious about preserving taxpayers’ dollars, the F.D.I.C. has tried to steer clear of making judgments about whether homeowners have fallen victim to fraud.

“Our position on stated income loans is that a lot of people say that someone else was responsible for the fraud,” Michael H. Krimminger, special adviser for policy in the office of the F.D.I.C. chairman, said in an interview. “It’s much more productive to get people to a position where they can stay in their homes, and to do that we must be able to verify what a borrower can afford.”

But Ms. Brickhouse’s case has a persuasive ring to it, not least because one of those engaged in the alleged fraud returned her deed and swore out an affidavit describing the scheme. In December, Mayor Michael R. Bloomberg invited Ms. Brickhouse to a press conference and vowed to forestall foreclosures in cases like hers.

Her story finds an echo in many working-class corners of New York City. The company accused of victimizing her, Home Savers Consulting, has been sued by homeowners in Brooklyn, Queens and Staten Island, and nearly every case alleges a similar pattern of deception: An owner behind on a mortgage turns in desperation to Home Savers, which secretly transfers the deed to a “straw buyer” with good credit who qualifies for a cash-out refinancing. Then, it is alleged, Home Savers drains the homes of equity.

Jessica Attie, co-director of the South Brooklyn Legal Services Foreclosure Prevention Project, estimates that Home Savers extracted at least $5 million in equity from the homes of people in a handful of her cases. Legal services lawyers have frequently forwarded information on Home Savers to prosecutors, but no criminal cases have been brought.

One of Home Savers’s founders, Garth Celestine, declined to address any detail of Ms. Brickhouse’s case. “We had a plan to help people,” he said on Thursday. “Maybe it did not always work.”

He said he would explain all of it in a book he is writing. Asked its title, he replied, “I’m thinking of calling it ‘No Good Deed Goes Unpunished.’ ”

Hundreds of new fraud claims like Ms. Brickhouse’s emerge every month. The F.B.I.’s most recent Financial Crimes Report estimates that mortgage fraud costs Americans $4 billion to $6 billion annually. The same report identifies New York State as a “Top 10 hot spot” for fraud, and notes that federal law enforcement is overburdened.

Last week, Sheila C. Bair, the F.D.I.C.’s chairwoman, called mortgage fraud “a significant problem” and warned that “scammers are moving into foreclosure prevention.”

Waver Brickhouse does not come by trust easily.

She grew up in the public housing towers of Brownsville, and her mother drilled it in her that survival depended on keeping to herself. She led a largely solitary life, going to work and church, and adopting four foster children.

In 1996, she took her life savings and purchased her first home. Slowly she became friends with a neighbor, Ophelia Fenner. When Ms. Brickhouse fell behind on her mortgage payments in 2005, Ms. Fenner suggested that Home Savers Consulting might help set her finances straight.

Ms. Fenner, court papers show, received a finder’s fee for guiding her friend to Home Savers, a fact that she did not disclose to Ms. Brickhouse.

Home Savers Consulting, and its principals — Mr. Celestine and Phillip Simon — are neither real estate agents nor mortgage brokers. They offered to refinance Ms. Brickhouse’s $213,000 home mortgage with the help of a “sponsor,” and to use the proceeds to pay her mortgage for a year. The breathing space would give Ms. Brickhouse time to pay off her debts. At year’s end, Ms. Brickhouse would resume her mortgage payments and Home Savers would take a small fee.

Recounting the arrangement, Ms. Brickhouse shakes her head. “I thought this would save me,” she said.

In May 2007, Ms. Brickhouse attended a meeting, according to court papers and a sworn affidavit. There was a representative from IndyMac Bank; Yolanda Millett, the straw buyer; Ms. Millett’s lawyer; and a Home Savers representative.

Ms. Brickhouse assumed everyone was there to help her; they were in fact selling off her house.

Ms. Millett received $8,000 to serve as the straw buyer, according to the court papers. On the spot, IndyMac gave Ms. Millett a $380,000 mortgage, allowing Home Savers to strip the home of $150,000 worth of equity.

Ms. Millett could not reached for comment.

A year later, Ms. Millett apparently had second thoughts. In August 2008, she swore out an affidavit that accused Home Savers of misleading Ms. Brickhouse at every turn. “She did not at any time believe that ownership of the subject property passed to me,” Ms. Millett stated in the affidavit, “and her intent was never to relinquish ownership.”

Ms. Millett returned the deed to Ms. Brickhouse. But Ms. Brickhouse’s travails had not ended.

About the same time, the F.D.I.C. took over IndyMac Bank. The agency now has responsibility for its assets, including its large mortgage portfolio.

F.D.I.C. officials asked Ms. Brickhouse to forward financial information so they could work out arrangements for her to pay some portion of the $380,000 mortgage. Ms. Brickhouse acknowledges that she is responsible for the $213,000 on her original mortgage. But she refuses to pay any part of the mortgage that she said was obtained through fraud.

Federal officials say they have no way of determining whether Home Savers Consulting committed fraud. And in any case, they add, IndyMac was not involved.

But court papers show that an IndyMac representative sat at the table as Home Savers orchestrated the secret sale.

“They knew that Home Savers had no legal standing whatsoever and yet said nothing,” said Mr. Wagner, Ms. Brickhouse’s lawyer. “IndyMac was writing out bad paper and they knew it.”

For now, F.D.I.C. officials say they are not looking to foreclose on Ms. Brickhouse’s home. But they have turned to a highly paid corporate lawyer who specializes in defending subprime lenders against class-action lawsuits to pursue the case with Ms. Brickhouse. “As the receiver for the bank and deposit insurer, we must balance our action with our duty to protect the depositors from the bank,” Mr. Krimminger said.

As for Ms. Brickhouse, she sits some nights and examines the documents she signed, and wonders at her naïveté. Recently, Ophelia Fenner apologized, saying she felt very bad.

“I told her, ‘So do I,’ ” Ms. Brickhouse said. “This almost cost me a house and a friendship, and I only had one of each.”

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Gerald Carti, a 62-year-old loan officer and owner of a filed mortgage New Jersey-based mortgage company, pled guilty last week to wire fraud conspiracy and money laundering conspiracy in connection with a mortgage fraud and property-flipping scheme involving rental properties in Paterson, NJ.

Carti, who ran US Mortgage Corp., was originally scheduled to go on trial May 4th, admitted conspiring with his co-defendants and several others to originate mortgage loans fraudulently and to launder proceeds of the loans for the four years between 2002 and 2005. Carti pleaded guilty before U.S. District Judge Jose Linares to one count of wire fraud conspiracy, which carries a maximum statutory penalty of 30 years in prison and a fine of $1 million, and one count of money laundering conspiracy, which has a maximum statutory penalty of 10 years in prison and a fine of $250,000.

Under the advisory U.S. Sentencing Guidelines, Gerald Carti now faces an actual sentencing range of between 46 and 71 months in prison. He will also be required to pay restitution to the victims, estimated at $1,030,745, not including interest. The guidelines are advisory only, and Judge Linares has discretion in imposing a sentence within, above or below the guidelines range.

Carti admitted that he conspired with Michael Eliasof, a former Paramus, NJ, real estate agent; William C. Colacino Jr., a now-deceased Garfield, NJ, attorney previously identified as an un-indicted co-conspirator; Melanie Gebbia, William C. Colacino Jr’s legal assistant; William Ottaviano, an appraiser; Frank Corallo, a former US Mortgage loan processor; co-defendant Renford Davis, of Paterson, and Hopeton Bradley, who jointly managed many of the Paterson properties involved in the scheme; and others. Eliasof, Gebbia, Ottaviano, Corallo, Bradley (who has since died) and one other conspirator have each pleaded guilty in connection with the scheme. A trial is scheduled to begin on May 4 for Davis and co-defendants Amer Mir, of Jersey City, NJ, and Frederick Ugwu, of Saddle River, NJ.

Gerald Carti admitted helping Michael Eliasof obtain mortgage loans for borrowers to purchase two- and three-family homes in Paterson, knowing that the borrowers would be putting no money down to purchase the properties. Carti also admitted permitting the borrowers to submit loan applications to US Mortgage falsely stating that they had made substantial down payments and allowing US Mortgage to fund the loans, even though the borrowers had not made any down payments. Carti then admitted that the closings of the loans took place at the law office of William C. Colacino Jr., then a Garfield municipal judge, and that Carti received as a commission 50 percent of the fees that US Mortgage received for each loan.

Carti also admitted that by April 2004, Residential Funding Corporation informed US Mortgage that some of the loans were part of a scheme involving Carti, Michael Eliasof and William C. Colacino Jr.

According to Carti, during a meeting concerning these allegations, M.M. and S.M., both senior officers at US Mortgage, were informed that the loans were no-money-down deals.

Carti stated that after the meeting, S.M. directed him to pay off the loans by refinancing them through new mortgage loans for the existing unqualified borrowers or reselling the Paterson properties, which Carti partly accomplished with Corallo’s assistance by originating new mortgage loans for some of the Paterson properties through US Mortgage.

According to Carti, S.M. insisted that these new mortgage loans be brokered, rather than funded and underwritten by US Mortgage. In addition, Carti admitted that he gave applications for mortgage loans for some of the properties to his co-defendant, Mir, a loan officer at Jersey City-based United Home Mortgage Co., who demanded bribes from others to ensure that the mortgage loans being sought were funded. Finally, Carti admitted that in 2002, S.M. told him he would receive a commission from American Title & Settlement Services, LLC, which S.M. controlled, for each mortgage loan that he referred to American Title for title insurance, and that he received these commissions through an entity called Dream On Enterprises, LLC.

Carti’s guilty plea is the latest step in an investigation by the U.S. Department of Housing and Urban Development Office of Inspector General (HUD-OIG), the FBI, the U.S. Postal Inspection Service and the IRS Criminal Investigations Division into fraudulent Federal Housing Administration-insured and conventional mortgage loans originated by various New Jersey mortgage companies, including US Mortgage and United Home Mortgage. The investigation has resulted in a dozen guilty pleas from New Jersey residents.

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