Federal Prosecutors Accuse Loss Mitigation Services Of Defrauding HUD, Fannie Mae, and Freddie Mac
The owners and co-founders of Loss Mitigation Services are accused of defrauding Fannie Mae, Freddie Mac, and HUD. Federal prosecutors allege the Massachusetts based short sale company defrauded government agencies on nearly 100 short sale transactions.
Loss Mitigation Services negotiates with lenders and mortgage guarantors approval of short sales in lieu of foreclosure.
A short sale occurs when the mortgage debt on the home is greater than the sale price. As a result, the lender or mortgage owner agrees to take a loss on the transaction.
Prosecutors allege company founders Gabriel Tavarez and Jaime Mulvihill collected fees for acting on behalf of underwater homeowners.
Industry standards normally forbid mortgage guarantors paying short sale negotiators any proceeds from the short sale.
Yet, authorities claim that that is exactly what Tavarez and Mulvihill did.
How Loss Mitigation Services Committed Fraud
Prosecutors allege from 2014 to 2017, Tavarez and Mulvihill allegedly falsely claimed lenders had agreed to pay Loss Mitigation Services fees known as “seller paid closing costs” or “seller concessions” from the proceeds of the short sales.
However, court documents state that the lenders made no such promises.
As a result of Tavarez and Mulvihill’s claims, settlement agents paid Loss Mitigation Services roughly 3% of the short sale price. Lenders paid fees to the company paid that were above and beyond anyone else involved in the transaction.
Tavarez or Mulvihill allegedly filed false short sale transaction documents to deceive lenders.
Additionally, Tavarez allegedly created fake letters from mortgage brokers claiming they had approved buyers for financing. This was done to convince them to approve the additional fees.
In total, the scheme allegedly defrauded lenders and investors out of nearly $500,000 on about 90 short sale transactions.
Federal prosecutors charged Tavarez and Mulvihill with conspiracy to commit wire fraud. Prosecutors also charged Tavarez with aggravated identity theft.
The charge of conspiracy to commit wire fraud carries up to 20 years in prison with three years of supervised release. It also includes a fine of $250,000 or twice the gross gain or loss. The charge of aggravated identity theft carries a mandatory two-year sentence that must run consecutively to any other sentence imposed. It also includes one year of supervised release and a fine of $250,000.