Earlier this week, the CEO and a loan officer of the Bloomfield-based real estate investment firm, Home Start America, Inc. (HSA), pleaded guilty to charges related to a $1.5 million fraud conspiracy.
According to a press release from U.S. Attorney Paul J. Fishman of the FBI, Michael Kaufman, the CEO and founder of HSA, and David Wynn admitted earlier this week to directing a long-running, large-scale wire fraud conspiracy through HSA.
Kaufman, 43, of Reading, Pa., pleaded guilty on Monday, April 11, to a superseding indictment charging both men with conspiracy to commit wire fraud. Wynn, 45, of Englewood, N.J., pleaded guilty on Tuesday to the same charge.
Kaufman founded HSA in Bloomfield, and at one time employed more than 30 people. As part of the scheme, Kaufman and his team recruited customers — often first-time home buyers — to purchase properties quickly, with promises of no money down, no closing costs, and repairs paid for by HSA. Kaufman would then steer the purchasers to loan officers, including Wynn.
Many of the properties sold by HSA had actually been bought by HSA shortly before, and then “flipped” to the unsuspecting buyers for far more than HSA paid. Kaufman, Wynn, and others falsely inflated the buyers’ income and assets on loan documents to make it appear that the buyers could afford the properties HSA was selling, when the purchasers did not have the means to buy the properties.
The victim’s financial institutions—relying on the false figures in the loan documents—then issued the mortgage loans, unaware of the purchasers’ true financial conditions. HSA and Kaufman received illicit profits when the transactions closed, and Wynn and other loan officers received commissions for their fraudulent work. After the closings, the buyers could not make the payments on the properties, and nearly always lost the properties to foreclosure.
The fraud, which began as early as 2002 and lasted through June 2005, caused over $1.5 million in loss to the banks, and earned hundreds of thousands of dollars in profits for Kaufman and HSA.
At sentencing, Kaufman and Wynn each face a maximum of 20 years in jail and a fine of $250,000, or twice the gain or loss derived from their offenses.
Were any of you victims of HSA’s fraud? Have you had other run-ins with unethical or illegal real estate dealings? Tell us your stories.
Bad Boys, Bad Boys, Whatcha gonna do when they come for you? Bad Boys, Bad Boys
There are good & bad people in every single line of employment. and also the “professions”. Sadly the public only (usually) hears about the bad ones, and the those that are above and beyond in service to their clients seldom even get a “thanks”.
So, while this is horrible and behavior like this is what caused the housing bubble and the subsequent crash, let me play devil’s advocate here for a minute.
I closed on my first home a few months ago… When I put in the application, I had to read it and sign it. Then at closing, I had to AGAIN sign that everything on the application was true. Is something different when you deal with these mortgage brokers instead of directly with the bank as I did? The application was a pretty standard HUD form that I can only imagine brokers have to use too. Did these guys forge their clients signatures and never show them the official HUD application form? Or did their clients sign the falsified applications?
Don’t get me wrong.. the guys are still scum and I hope they get locked up for a while. I’m just saying that if my loan officer had lied about my income or assets, there were at least 2 opportunities where I would have caught it.
I agree with backfromthesouth–the buyers had ample opportunity to notice that the figures for their income, assets, etc. were false. That means that at best they were negligent–possibly grossly negligent, depending on the circumstances–and at worst were knowingly complicit. That means that at a minimum, they should be civilly liable for damages; they might also be criminally liable. The authorities should go after them as well, and not give them a pass.