David B. Fein, United States Attorney for the District of Connecticut, announced that CARLOS GARCIA, 48, of Bayberry Lane, Guilford, waived his right to indictment and pleaded guilty today before United States Magistrate Judge Thomas P. Smith in Hartford to mail fraud, wire fraud, and tax evasion charges stemming from a $2 million investment scheme.
“The Connecticut U.S. Attorney’s Office and our federal, state, and local law enforcement partners are committed to investigating investment fraud, prosecuting those who engineer these schemes, and seeking restitution for victims,” stated U.S. Attorney Fein.
According to court documents and statements made in court, from at least as early as 2002 until 2009, GARCIA purported to be an investment advisor/hedge fund manager, selling shares in “Paramount Equity Partners, LLC,” an investment vehicle that he represented would be used to invest client funds. GARCIA directed certain clients to cash out their stock holdings or other investments, obtain surrender checks by mail, and endorse the checks over to “Garcia Capital Management, LLC,” an entity that GARCIA controlled. GARCIA then deposited the surrender checks into the Garcia Capital Management, LLC bank account. GARCIA directed other clients to wire transfer money directly into the bank account for Paramount Equity Partners, LLC, and he then transferred those funds into the Garcia Capital Management, LLC bank account.
Instead of investing the funds as promised, GARCIA used clients’ money to pay for personal expenses for himself and his family, and to make “lulling” payments to clients. Through this scheme, GARCIA victimized at least 10 people and caused a net loss to his victims of more than $2 million.
As part of the scheme, GARCIA created and mailed bogus account statements and correspondence to his client victims that discussed the returns they were earning on their investments. In some cases, GARCIA also created false federal Internal Revenue Service Form 1065 Schedule K-1s so that victims filed false tax returns and paid taxes on returns they never earned.
GARCIA also willfully evaded the payment of income taxes for the tax years 2005, 2006, 2007 and 2008, resulting in a tax loss to the government of $38,145.
Today, GARCIA pleaded guilty to one count of mail fraud, one count of wire fraud and four counts of tax evasion. GARCIA is scheduled to be sentenced by United States District Judge Vanessa L. Bryant on January 25, 2011, at which time GARCIA faces a maximum term of imprisonment of 60 years and a fine of up to approximately $4 million. GARCIA also will be ordered to pay restitution to his victims and to resolve his outstanding tax liabilities with the IRS.
This matter was investigated by the Internal Revenue Service – Criminal Investigation and the Federal Bureau of Investigation. The case is being prosecuted by Assistant United States Attorney Susan L. Wines.
U.S. Attorney Fein noted that this prosecution falls under the umbrella of the President’s Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The Task Force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit: www.StopFraud.gov.

David B. Fein, United States Attorney for the District of Connecticut, today announced that KEVIN W. CAFFREY, 45, of Wolcott, pleaded guilty yesterday, October 14, before United States District Judge Janet C. Hall in Bridgeport to one count of bank fraud and one count of filing a false tax return. The charges stem from CAFFREY’s role in a scheme that defrauded Webster Bank of nearly $6.2 million.
According to court documents and statements made in court, between approximately May 2000 and May 2006, CAFFREY was married to an individual who worked at Webster Bank in the Property Services Division. The Property Services Division was responsible for, among other things, the acquisition and leasing of properties for Webster Bank’s Retail Banking business. In 2002, CAFFREY and others formed New House LLC and registered the limited liability company with the Connecticut Secretary of State’s Office. The only listed member for New House was CAFFREY and its business address was 272 Hauser Street in Waterbury, a property owned by CAFFREY or his mother since the 1960s.
As part of a scheme to defraud Webster Bank, CAFFREY and others falsely represented to Webster Bank’s Vendor Management Department that New House LLC was a legitimate company entitled to certain fees because of real estate transactions entered into by the bank. In fact, New House LLC was a sham company that never acted as a broker or landlord in any real estate transactions and, between 2002 and at least 2008, CAFFREY and others executed a fraudulent scheme that caused Webster Bank to make payments to New House LLC. Between June 2002 and December 2007, CAFFREY and others submitted paperwork that falsely represented New House LLC was due a commission from numerous Webster Bank real estate transactions, causing Webster Bank to make approximately 90 payments totaling nearly $4.3 million to CAFFREY and others. As part of the scheme, CAFFREY had possession over the checkbook for New House LLC’s bank account, was aware of the fraudulent deposits made to the bank account and was involved in the disbursement of funds from the bank account to himself and others.
The government has alleged that the scheme continued from January 2009 to January 2010 without CAFFREY’s participation.
CAFFREY argues that the total amount of the fraud that should be attributed to him is $1,073,064.90 and the government takes the position that he is responsible for the full amount of the fraud involving New House LLC, which is approximately $4.3 million.
CAFFREY did not file federal tax returns on behalf of New House LLC, and failed to report the proceeds of the fraud on his personal federal tax returns. In the 2005 through 2008 tax years, CAFFREY failed to report more than $353,000 in income, resulting in a tax loss to the government of $90,054.
Judge Hall has scheduled sentencing for January 18, 2011, at which time CAFFREY faces a maximum term of imprisonment of 33 years and a fine of up to approximately $2 million. CAFFREY also will be ordered to resolve his tax liability with the Internal Revenue Service, including the payment of applicable interest and penalties.
This matter is being investigated by the Federal Bureau of Investigation and the Internal Revenue Service – Criminal Investigation. The case is being prosecuted by Assistant United States Attorney Nora R. Dannehy.

David B. Fein, United States Attorney for the District of Connecticut, today announced that a federal grand jury sitting in New Haven has returned a second superseding indictment charging a total of 10 individuals with various offenses related to their alleged participation in a mortgage fraud conspiracy. Six defendants, including Syed A. Babar of New London, have been charged previously with various mortgage fraud offenses stemming from the alleged scheme. The second superseding indictment charges four additional defendants, MARSHALL ASMAR, 40, of Joanne Drive, Milford; WENDY WERNER, 45, of Sarasota, Florida; REHAN QAMER, 38, formerly of Ashtabula, Ohio, and MOHAMMAD SALEEM, 39, formerly of Flushing, New York.

The indictment alleges that, between August 2006 and May 2010, Syed A. Babar, also known as “Ali” and “Asad,” 28, of New London, was the de facto leader and organizer of a conspiracy to obtain millions of dollars in residential real estate loans, including loans insured by the Federal Housing Administration, through the use of sham sales contracts, false loan applications and fraudulent property appraisals. The indictment alleges that ASMAR and WERNER entered into sales contracts with straw purchasers to sell homes for a price higher than the actual price that ASMAR and WERNER, as the sellers, would receive. Members of the conspiracy—which included a mortgage broker, two attorneys and a real estate appraiser—submitted false documentation in connection with loan applications that were submitted, including fraudulent appraisals of the properties being purchased in order to justify the inflated sales price and the loan amount being sought to fund each purchase. The indictment further alleges that members of the conspiracy created a fictitious construction company called “Sheda Telle Construction, LLC,” in order to divert fraud proceeds to it and, in some cases, to falsely justify the artificially inflated sales price of houses based on renovations purportedly made to the property that, in fact, did not occur. The co-conspirators then split the fraud proceeds.

It is alleged that, in August 2006, WERNER, through her company, Marbo Restorations, LLC, sold three houses on Lake Street in Norwich to QAMER, a straw purchaser working with Babar. The fraudulently inflated sales prices for 35, 37, and 41 Lake Street were $260,000, $270,000, and $270,000, respectively, and QAMER obtained residential real estate loans to purchase homes for those amounts. WERNER provided Babar with approximately $283,000 of the proceeds generated from the sale of the three houses. Babar then wrote 10 checks totaling approximately $179,000 to QAMER.

SALEEM also is alleged to have served as a straw purchaser during the conspiracy. Babar is alleged to have recruited and paid straw purchasers up to $20,000 to nominally purchase homes.

Contrary to the representations made on the loan applications, it is alleged that the straw purchasers never occupied the houses as their primary residences, failed to make payments on the loans and the properties went into foreclosure, including the three Lake Street properties that QAMER purchased from WERNER.

The alleged mortgage fraud scheme involved approximately 35 properties and loans obtained in the amount of approximately $10 million. Current losses from the scheme are estimated to be at least $2.5 million.

The indictment charges ASMAR, WERNER, QAMER, and SALEEM with one count of conspiracy to commit wire fraud, which carries a maximum term of imprisonment of five years. ASMAR and WERNER also are charged with eight counts of wire fraud, which carries a maximum term of imprisonment of 20 years on each count. The indictment also charges ASMAR with four counts of making false statements, which carries a maximum term of imprisonment of five years on each count. Finally, the indictment charges WERNER and QAMER with one count of mail fraud, which carries a maximum term of imprisonment of 20 years.

The second superseding indictment was returned on July 29, 2010, and unsealed on September 15. ASMAR was arrested on August 20. He entered a plea of not guilty to the charges and is released on a bond in the amount of $250,000, fully secured by real property. WERNER was arrested in Florida on September 10. On September 21, she appeared before United States Magistrate Judge Donna F. Martinez in Hartford and entered a plea of not guilty to the charges. She is released on a bond in the amount of $85,000, fully secured by real property.

QAMER and SALEEM are currently being sought by law enforcement.

U.S. Attorney Fein stressed that an indictment is not evidence of guilt. Charges are only allegations, and each defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.

U.S. Attorney Fein stated that the investigation is ongoing.

This case is being investigated by the Federal Bureau of Investigation and the U.S. Department of Housing and Urban Development – Office of Inspector General, and is being prosecuted by Assistant United States Attorneys Eric J. Glover and Susan Wines.

In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. In addition to investigating past mortgage fraud schemes, the Task Force will focus on emerging crime trends that are associated with the growing tide of foreclosures, including foreclosure rescue schemes, and short sale schemes. Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 and requesting the Connecticut Mortgage Fraud Task Force, or by sending an email to ctmortgagefraud@ic.fbi.gov.

The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General; and State of Connecticut Department of Banking.

To report financial fraud crimes, and to learn more about the President’s Financial Fraud Enforcement Task Force, please visit www.stopfraud.gov.

Hartford – Jane Soulliere, 44, of Norwich, pleaded guilty Wednesday before United States District Judge Alfred V. Covello in Hartford to conspiracy to commit mail fraud and wire fraud, stemming from a mortgage fraud scheme based in southeastern Connecticut.

According to court documents and statements made in court, Soulliere was a member of the mortgage fraud conspiracy headed by Jose Guzman and others. Soulliere was paid a total of approximately $28,000 for participating in this conspiracy. However, her fraudulent conduct caused a loss of more than $1 million to lending institutions, according to the U.S. attorney’s office.

Soulliere is scheduled to be sentenced Feb. 22, at which time she faces a maximum prison term of 20 years. To date, six people involved in the scheme have pleaded guilty. On Sept. 9, 2008, Guzman plead guilty to conspiracy to commit mail fraud and wire fraud. He awaits sentencing.

This case is being investigated by the Federal Bureau of Investigation and the U.S. Department of Housing and Urban Development and the Office of Inspector General. The case is being prosecuted by U.S. Attorney Michael S. McGarry.

David B. Fein, United States Attorney for the District of Connecticut, today announced that a federal grand jury sitting in New Haven has returned an 11-count indictment charging STEVEN J. KOTTAGE, 44, and GENARO R. HATHAWAY, 46, both of Weston, and MARY ELLEN DURSO, 53, of Milford, with conspiracy and other offenses stemming from the defendants alleged involvement in mortgage fraud.

The indictment alleges that KOTTAGE and HATHAWAY, who are married, conspired to commit wire fraud relating to a home on Fire Island, New York. HATHAWAY, a former attorney in Connecticut and New York, and KOTTAGE purchased and financed the property in the name of KOTTAGE’s mother by filing false loan applications to Wells Fargo Home Mortgage. In each instance, HATHAWAY served as the closing attorney on behalf of KOTTAGE’s mother and Wells Fargo. The indictment further alleges that HATHAWAY subsequently purchased the property from KOTTAGE’s mother’s estate in his own name and, in so doing, made a materially false loan application to H&R Block Home Mortgage to obtain a separate mortgage. Rather than using the sale proceeds due and owing to KOTTAGE’s mother’s estate to pay off the outstanding loans issued by Wells Fargo, KOTTAGE and HATHAWAY used those proceeds to pay off an obligation arising from a separate real estate transaction in which HATHAWAY served as the closing attorney for the seller. The losses resulting from this alleged conspiracy exceed $500,000.

The indictment further alleges that KOTTAGE, HATHAWAY, and DURSO conspired to commit bank fraud by filing a materially false loan application to Washington Mutual to refinance a condominium in Hillsboro Beach, Florida. DURSO served as the straw owner for the condo in order to obtain the fraudulent loan proceeds for the benefit of KOTTAGE and HATHAWAY.

The indictment also charges HATHAWAY with tax evasion in 2005 and DURSO with filing false tax returns from 2004 to 2008.

The indictment charges KOTTAGE and HATHAWAY with two counts and DURSO with one count of conspiracy, a charge that carries a maximum term of imprisonment of 30 years on each count. The indictment further charges KOTTAGE and HATHAWAY with two counts of wire fraud, a charge that carries a maximum term of imprisonment of 30 years on each count. KOTTAGE, HATHAWAY and DURSO are each charged with one count of bank fraud, which carries a maximum term of imprisonment of 30 years. The one count of tax evasion against HATHAWAY carries a maximum term of imprisonment of five years, and the five counts of filing false tax returns against DURSO carry a maximum term of imprisonment of three years, on each count.

U.S. Attorney Fein stressed that an indictment is not evidence of guilt. Charges are only allegations, and each defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.

This case is being investigated by the Federal Bureau of Investigation and the Internal Revenue Service – Criminal Investigation. The case is being prosecuted by Assistant United States Attorney David T. Huang.

In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. In addition to investigating past mortgage fraud schemes, the Task Force will focus on emerging crime trends that are associated with the growing tide of foreclosures, including foreclosure rescue schemes, and short sale schemes. Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 and requesting the Connecticut Mortgage Fraud Task Force, or by sending an email to ctmortgagefraud@ic.fbi.gov.

The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General, and State of Connecticut Department of Banking.

To report financial fraud crimes, and to learn more about the President’s Financial Fraud Enforcement Task Force, please visit www.stopfraud.gov.

A federal grand jury in Connecticut indicted five people this week linked to a $10 million mortgage-fraud scheme led by Syed A. Babar, a 28-year-old Connecticut resident. The defendants previously were arrested on criminal complaints and released on bond, according to the U.S. Attorney’s office.

The scheme involved approximately 35 properties and loans obtained in the amount of an estimated $10 million, according to the government. Current losses from the operation are estimated at $3 million.

New charges were brought against Babar, who has been held without bail since he was indicted in April. He is now accused of conspiring with the others to defraud the Federal Housing Administration, which offers insurance for government loans to borrowers of low and moderate income.

Indicted with Babar were Thomas E. Gallagher, 67; Morris I. Olmer, 82; David Avigdor, 56; Nathan M. Russo, 34; and Rab Nawaz, 47. They are each charged with one count of conspiracy, eight counts of wire fraud and four counts of making false statements.

Nawas is also charged with one count of obstruction of justice, after he was accused of trying to influence a witness to provide false information during the government investigation.

The indictment alleges that between February 2007 and April 2010, Babar, along with Russo, a mortgage broker; Gallagher, a real estate appraiser; Olmer, a former attorney who has not been licensed to practice since February 2007, and Avigdor, an attorney who shared an office with Olmer, obtained millions of dollars in residential real estate loans through the use of sham sales contracts, false loan applications and fraudulent property appraisals.

Federal authorities have charged Rab Nawaz of Waterford in connection with a real estate fraud scheme that involved purchasing homes in New London and selling them to straw buyers at artificially inflated prices.

Nawaz, 47, of Harbor View Avenue, was arrested Wednesday morning at his home. He appeared before U.S. District Judge Ellen Bree Burns on charges of conspiracy to commit wire fraud and obstruction of justice and was released on a $100,000 bond secured by property.

Nawaz allegedly conspired with Syed A. Babar and others in a scheme involving real estate throughout Connecticut, costing lenders an estimated $2.5 million. The scheme involved more than 25 properties in New London, New Haven and other locations.

According to the U.S. Attorney’s office, Nawaz purchased homes in New London and sold them to straw buyers at artificially inflated prices that, typically, were supported by fraudulent appraisals. Although the straw buyers would represent that they intended to occupy the homes as their primary residence, they had no intention of doing so. They defaulted on the loans and allowed the homes to go into foreclosure.

Following Babar’s arrest on May 14, Nawaz allegedly met with a co-conspirator in the case, advised him of evidence that the government had presented against Babar and instructed him as to “what he should and should not admit knowing to government investigators,” according to the U.S. Attorney’s office.

The charge of conspiracy to commit wire fraud carries a maximum term of imprisonment of 20 years and the charge of obstruction of justice carries a maximum term of imprisonment of 10 years.

U.S. Attorney David Fein said the investigation is ongoing. The case is being investigated by the Federal Bureau of Investigation and the U.S. Department of Housing and Urban Development, Office of Inspector General. The case is being prosecuted by Assistant United States Attorney Eric J. Glover.

-Karen Florin

Nora R. Dannehy, United States Attorney for the District of Connecticut, announced that ANNA McELANEY, 38, a licensed real estate agent residing in Norwalk, pleaded guilty today before United States Magistrate Judge Holly B. Fitzsimmons in Bridgeport to one count of bank fraud stemming from her involvement in a “short sale” mortgage fraud scheme.

A short sale transaction involves a mortgage holder or lender entering into an agreement to release its mortgage or lien on real property in exchange for payment of less than the total amount owed on the underlying debt. Many short sale transactions are legitimate.

According to court documents and statements made in court, McELANEY worked with Sergio Natera, also a real estate agent, to defraud Regions Bank, which held two mortgages on a residential property in Bridgeport. On December 5, 2007, McELANEY, who was a listing agent for the property, received an offer to purchase the property for a price of $132,500. However, McELANEY and Natera subsequently directed communications to Regions Bank that the highest offer to purchase the property was for $102,375 by BOS Asset Management, LLC, an entity that Natera controlled. The bank agreed to a short sale of the property for the lower price, and released its mortgages on the property.

On June 9, 2008, Natera, through BOS Asset Management, sold the property for $132,500 to the original bidder on the property, and Natera and McELANEY retained the difference in the two sale prices.

McELANEY is scheduled to be sentenced by United States District Judge Janet C. Hall on May 10, 2010, at which time she faces a maximum term of imprisonment of 30 years, a fine of up to $1 million, and an order of restitution.

Natera pleaded guilty to one count of bank fraud on February 11, 2010. He awaits sentencing.

This matter is being investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant United States Attorney Ann M. Nevins.

In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. In addition to investigating past mortgage fraud schemes, the Task Force will focus on emerging crime trends that are associated with the growing tide of foreclosures, including foreclosure rescue schemes, and short sale schemes. Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 and requesting the Connecticut Mortgage Fraud Task Force, or by sending an email to ctmortgagefraud@ic.fbi.gov.

The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation Division; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General, and State of Connecticut Department of Banking.

Midland Police say the second man wanted in this case has turned himself in.

Marcus Rosenberger turned himself in around noon on Wednesday.

California REALTOR® Jose Oliva Sentenced for Real Estate Fraud: A real estate agent from Fontana, Calif., who was arrested in July of this year on felony charges connected to real estate fraud, has finally been sentenced… to six (6) months in jail followed by three (3) years probation.

John Matouk pleads guilty in Michigan of quitclaim deed fraud: According to the Wayne County Prosecutor’s Office, in February 2004, Matouk, who owned half a property in the 1100 block of Telegraph in Dearborn, forged a quitclaim deed from an elderly couple that transferred the entire property to his company, LM Investments of Dearborn LLC. Before his sentencing last week, Matouk was ordered to pay $26,000 in real estate taxes, the outstanding balance on a $650,000 loan, and court and probation costs. Because of his plea, Matouk received a sentence of two (2) years’ probation.

Rockland County, New York, task force targets mortgage fraud: Rockland County, NY, officials are trying to fight the worsening mortgage fraud problem by forming a Real Estate Fraud Investigation Task Force. The task force, a joint effort of Rockland District Attorney, County Clerk and County Sheriff, will investigate and prosecute cases involving recorded real estate documents, with an emphasis on instances in which the victim’s home is at risk of foreclosure.

U.S. Attorney charges Missouri mortgage brokers with cash-back-at-closing fraud: John F. Wood, United States Attorney for the Western District of Missouri, announced that several mortgage brokers are among six Missouri residents indicted by a federal grand jury last week for participating in several related mortgage fraud schemes. Charles M. Davis, 34, of Rogersville, Mo., Cheryl Joan Kassebaum, 42, and her husband, Scott Allen Kassebaum, 42, both of Ozark, Mo., Randall Lee Hall, 59, and Shanda Lynn Moore, 44, both of Springfield, Mo., and Steven Ray Spencer, 47, of Carl Junction, Mo., were charged in a 55-count indictment returned by a federal grand jury in Springfield. Davis, a former mortgage broker, was the owner of Master Marketing Consultants. The Kassebaums, former mortgage brokers, were owners of Metro Consulting Group. Hall is a former mortgage broker.

Westport, Connecticut, mortgage broker Fred Stevens pleads guilty to mortgage fraud: Stevens, 53, of Easton, Conn., is charged with submitting fraudulent mortgage applications with IndyMac Bank and other financial institutions resulting in losses of over $1,000,000.

Florida real estate appraiser Juan Gonzalez guilty of mortgage fraud: Gonzalez fraudulently obtained loans on more than 40 properties, victimizing numerous lenders and grossing over $5,000,000 in the process. As a result, the 51-year-old will spend the next 30 years in federal prison and pay a $1 million fine.

A 45-year-old Wilton, Connecticut, real estate attorney has pleaded guilty to one count of conspiracy to commit bank fraud, one count of fraud in loan and credit applications, and one count of mail fraud in connection with an $8 million real estate fraud scam through which he and others defrauded federally insured financial institutions, property owners, and others who sought to refinance their mortgages. Joseph Kriz, who recently forfeited his license to practice law, is now free on bond pending a sentencing hearing on Thursday, October 23.

According to documents filed with the U.S. District Court in Bridgeport, Connecticut, and statements made in court, Joseph Kriz was both a practicing real estate attorney in Westport, Connecticut, and a licensed mortgage broker, as well as a principal of Aspetuck Building & Development, LLC. In pleading guilty, Kriz admitted that, between January 2005 and March 2008, he and his co-conspirators altered and created false documents to obtain financing for properties which far exceeded the real value underlying their mortgages. In one instance, Kriz and his co-conspirators commissioned a false appraisal of a property that boosted a home’s square footage, thereby inappropriately increaing the value of a property and the loan.

Joseph Kriz also admitted that he converted funds from the sale and refinancing of his clients’ homes for his own personal use rather than pay off the mortgages on the properties as he had promised his clients.

During many of the property refinancings he handled, Kriz mailed to a title insurance company–First American Title Insurance Co.–a title policy representing that a new mortgage was the primary lien on a property. However, Kriz converted those new mortgages to fund his and his co-conspirators’ development projects, and the existing mortgages remained the primary lien on the properties.

As a result of this fraudulent conduct, Kriz defrauded banks and his clients of more than $8 million. He now faces a up to 65 years in federal prison and fines totaling nearly $16 million.

In May of this year, the Mississippi Department of Banking and Consumer Finance notified all of the state’s mortgage license holders that, as of July 1, 2008, the state will be participating in the National Mortgage Licensing System (NMLS) and that participation for all of the state’s mortgage license holders is mandatory.

NMLS officially launched on January 2, 2008, and was the culmination of a four-year effort by state regulators and is just one part of a multi-faceted plan being implemented to enhance consumer protection, improve regulation, increase uniformity of mortgage supervision, and streamline the licensing process. These efforts include coordinated supervision, improved regulatory practices, and consistent standards for testing and training for mortgage originators; and uniform license application, renewals and annual reports. To accomplish this, Mississippi’s Department of Banking and Consumer Finance amended the Mississippi Mortgage Consumer Protection Law during the past regular session of the Legislature to mandate participation in NMLS.

At its core, NMLS is a state-based approach that has the benefits of localized accountability and an on-the-ground regulatory system combined with the efficiencies of a nationwide framework. This type of framework has the potential to create high and consistent regulatory standards without preempting states important role in the development of consumer protections and the enforcement of lending standards.

NMLS’ basic feature is a central database, containing a single record for every state-licensed mortgage lender,
broker, and branch and loan originator, based on the uniform mortgage application forms developed by state
regulatory agencies. It will also drive standardization and coordination among state regulators in areas such as
licensing requirements, background checks, testing and education, enforcement action, examinations and annual
reporting, which is bound to have a positive impact in the fight against real estate and mortgage fraud.

To date, 42 state agencies representing mortgage regulators in 40 states have indicated their intent to be a part of
NMLS. By the end of 2008 there should be 19 state agencies on the system with another 14 participating in 2009.
The remainder of the 42 agencies are expected to come online in 2010 and 2011. Total projected enrollment in NMLS will be more than 500,000 professional licensees. In Mississippi, the Department of Banking and Consumer Finance estimates its enrollment will be approximately 4,000 mortgage professionals.

The Connecticut Department of Banking and the Louisiana Office of Financial Institutions have issued announcements indicating their participation on NMLS starting July 1, 2008, also. Connecticut licensees have until September 30, 2008 and Louisiana licensees have until October 1, 2008 to transition their license(s) onto NMLS. Both agencies will begin accepting submissions through NMLS on July 1.

The latest foreclosure statistics from RealtyTrac are out, and the news isn’t very good. According to the Q1 2008 U.S. Foreclosure Market Report, which tracks foreclosure filings (including default notices, auction sale notices and bank repossessions), 649,917 properties were foreclosed upon during the first quarter of the year, a 23% increase from the previous quarter and a 112% increase from the first quarter of 2007. The report also shows that one (1) in every 194 U.S. households received a foreclosure filing during the quarter.

Foreclosure activity in the quarter increased on a year-over-year basis in 46 out of the 50 states and in 90 of the nation’s 100 largest metro areas, demonstrating that most regions of the country are seeing more foreclosures. In some areas there are also some unusual, non-market factors impacting the foreclosure numbers. For example, the city of Philadelphia in late March issued a temporary moratorium on all foreclosure auctions for April, and the city has since adopted a program that will delay foreclosure proceedings on owner-occupied properties until the owners have met face-to-face with lenders to attempt a loan workout plan that would prevent foreclosure.

While programs like those in Philadelphia are certain to have a positive long-term impact, they could be simply deferring another flood of foreclosures, and that could extend the length of time it takes the market to recover from the current downward cycle, in which we’ve already seen seven consecutive quarters of increasing foreclosure activity.

Click on the map to the left for a close up view of exactly where foreclosure-related activity is playing out across the United States. As you’ll see, one (1) in every 54 Nevada households received a foreclosure filing during the first quarter, the highest foreclosure rate in the nation and 3.6 times the national average. Foreclosure filings were reported on 19,595 Nevada properties during the quarter, up 3% from the previous quarter and up 137% from the first quarter of 2007.

Foreclosure filings were reported on 169,831 California properties during the first quarter, the highest total in the nation at a rate of one (1) in every 78 households — the nation’s second highest foreclosure rate. Foreclosure activity in California increased 32% from the previous quarter and was up nearly 213% from the first quarter of 2007.

Arizona documented the nation’s third highest state foreclosure rate, with one (1) in every 95 households receiving a foreclosure filing during the quarter. Foreclosure filings were reported on 27,404 Arizona properties during the quarter, up 45% from the previous quarter and up nearly 245% from the first quarter of 2007.

Foreclosure filings were reported on 87,893 Florida properties during the first quarter, the second highest state total and giving Florida the nation’s 4th highest foreclosure rate — one (1) in every 97 households received a foreclosure filing during the quarter. Foreclosure activity in the state was up 17% from the previous quarter and up 178% from the first quarter of 2007.

Colorado foreclosure activity increased 33% from the previous quarter and 78% from the first quarter of 2007, and the state’s foreclosure rate ranked No. 5 among the states. Foreclosure filings were reported on 18,996 Colorado properties during the quarter, a rate of one in every 110 households.

Other states with foreclosure rates among the top 10 were Georgia, Michigan, Ohio, Massachusetts and Connecticut.