Suit Alleged that Lender and Purported Charity Concealed Loan Defaults from Federal Housing Administration
WASHINGTON, DC – (RealEstateRama) — Robert L. Capers, United States Attorney for the Eastern District of New York, David A. Montoya, Inspector General for the Department of Housing and Urban Development, and Frederick W. Gibson, Acting Inspector General for the Federal Deposit Insurance Corporation today announced the settlement of claims against Continental Mortgage Bankers d/b/a Financial Equities and its president, Walter Stashin, in United States v. Rainy Day Holdings, LLC. et al., Civil Action No. CV-15-5576. The case is pending in federal court in Central Islip before United States District Judge Joseph F. Bianco.
Continental and Stashin participated in a federal program sponsored by the United States Department of Housing and Urban Development (HUD) that allowed the lenders to make mortgage loans that are insured by the Federal Housing Administration (FHA) in the event of default. The complaint alleged that for at least eight loans, Continental and Stashin funneled payments on borrowers’ loans through a purported charitable organization, the Rainy Day Foundation, in order to avoid defaults and delinquencies that could trigger governmental investigation. The funneled payments artificially suppressed Continental’s comparative delinquency and default rates, as compiled and computed by the FHA. In the settlement, Continental and Stashin admitted to making the payments and that the payments altered the company’s delinquency and default rates. Continental and Stashin agreed to pay three hundred thousand dollars ($300,000) in settlement of the United States’ claims.
“The resolution of this matter, including the defendants’ admissions to wrongdoing, both help to restore the integrity of the FHA mortgage insurance program as well as to serve as a warning to others who would abuse federal mortgage programs,” stated United States Attorney Capers. “We will continue to vigorously pursue those who engage in such activity. We thank the HUD Office of the Inspector General, HUD Office of Program Enforcement, and the FDIC Office of the Inspector General for their outstanding work and support in investigating this matter.”
HUD Inspector General Montoya stated, “This settlement brings to a close Continental Mortgage Bankers’ deceptive practices while a participant in the FHA Direct Endorsement Lender Program. Their attempts to profit at the expense of unsuspecting investors and the public posed a risk to our mortgage insurance pool. The HUD Office of Inspector General will continue to work with our partners at the U.S. Attorney’s Office to expose and pursue those who abuse HUD’s programs.”
FDIC Acting Inspector General Gibson said “The FDIC OIG is pleased to have supported the Department of Justice and the Department of Housing and Urban Development in bringing about today’s settlement. By leveraging our resources, we can broaden the government’s efforts to pursue damages resulting from misconduct that has harmed the nation’s financial institutions and its mortgage markets. The civil penalties imposed today should send a strong message to others that fraudulent practices like those perpetrated by Mr. Stashin and his firm will not be tolerated.”
The United States’ case in this matter is being litigated by Assistant United States Attorneys Edward Newman, John Vagelatos, and Robert Schumacher.