Former Mortgage Security President Pleads Guilty to Defrauding Ginnie Mae of $2.5M

Robert Pena, the president and founder of Mortgage Securities Inc., has pleaded guilty to bilking Government National Mortgage Association (Ginnie Mae) of about $2.5M. The now defunct mortgage company was contracted by the government-run corporation, which guarantees mortgage-backed bonds that have been guaranteed by a US government agency, to pool and service eligible residential mortgages. This included collecting principal and interest payments and depositing the money into accounts that Ginnie Mae-held in trust. The company was then supposed to sell the Ginnie Mae-backed mortgage bonds to investors.

However, court documents state that starting in 2011, Pena allegedly diverted funds that borrowers sent his mortgage company, including big-dollar loan payoff checks, into secret, private accounts. He is accused of spending the money on his own business expenses and personal bills. He also purportedly took the escrow funds of borrowers, as well as mortgage-insurance premiums.

Pena is accused of hiding the mortgage fraud by sending Ginnie Mae false reports. The latter was forced to pay investors the about $2.5M that Pena allegedly misappropriated because it had guaranteed their investments.

Prosecutors charged Pena with wire fraud and conspiracy last year.

First Mortgage Corp. Also Accused of Defrauding Ginnie Mae
Mortgage Securities is not the only company accused of bilking Ginnie Mae. Last year, the US Securities and Exchange Commission filed charges against several First Mortgage Corporation senior executives who purportedly lied about how well the mortgages their employers had originated were doing, including claiming they were delinquent, so they could withdraw them from Ginnie Mae-guaranteed mortgage-backed securities. They then allegedly sold the mortgages into new mortgage bonds.

Investors were bilked out of $7.5M. First Mortgage, to settle the SEC charges, was fined $12.7M while the six executives were subject to penalties and agreed to be barred from serving as a public company director or officer for five years.

The SEC accused the men and First Mortgage of running the mortgage-backed securities fraud scam from 3/2011 to 3/2015. In addition to giving the impression that the mortgages were delinquent, they are accused of delaying depositing the payments made by customers on their mortgages and making it appear as if they too were delinquent. (The SEC notes while the customers had at one point been delinquent, they had since been issuing payments to get current but that the company withheld these checks so the mortgages would look like they were in default.)

First Mortgage then would take the “delinquent” mortgages from the Ginnie Mae mortgage bonds by invoking the latter’s own rule, which lets issuers repurchase their loans if they have been delinquent for at least 90 days. The SEC said these actions made some of the residential mortgage-backed prospectuses that first mortgage provided “false and misleading.”

The company would then deposit the borrowers’ checks, rendering the loans current. This made it possible for First Mortgage to resell the loans in new Ginnie Mae RMBS pools at prices that were higher. Meantime, investors did not receive interest payments on loans that were repurchased while First Mortgage purportedly profited.

The six First Mortgage executives agreed to settle the SEC charges without denying or admitting to them.

At the SSEK Partners Group, our securities fraud law firm is here to help investors recoup their mortgage securities fraud losses. Contact us today.

Mortgage company president pleads guilty to $2.5M fraud, FoxNews, October 5, 2017

Ginnie Mae

The SEC Complaint in the First Mortgage Case (PDF)

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