Refinancing conspirators dashing with cash

by Diana Aqra28 May 2013
Mortgage originators have found ways to temporarily divert refinancing funds away from paying down original mortgages, but are quickly getting punished. 
In April,  Stonegate Mortgage Company filed a lawsuit against Capital Financial Corporation in April for failing to satisfy outstanding liens on homes they were doing refinances for, according to a report by Law360.
A source who has chosen to be unnamed said that these unsatisfied liens were loans that were being refinanced. 
Stonegate alleges that Capital Financial improperly used Stonegate’s warehouse funds that were intended to satisfy outstanding liens on properties, the report said.
CFC used the funds for various improper reasons, none of which were to pay down outstanding debts, Stonegate alleges, the report said.  
Stonegate was left with US$ 5m in losses for faulty refinances. 
A similar scheme was prosecuted earlier this year in New Jersey. Fraudster Frederick Tropeano laundered millions of refinance funds into his own payroll and away from paying down original mortgages, according to the Monmouth County Prosecutor’s Office in Freehold, New Jersey. 
In many cases, the refinancing never actually occurred, the prosecutor’s press release in January said. 
Conspirators in both cases included the title companies and escrow account managers who were supposed to ensure that original mortgages get paid in full and new refinance mortgages are properly recorded as an existing mortgage debt.
In the Capital Finance case, the company was allegedly colluding with title Company, Park Avenue Abstract Inc. as well as Commonwealth Land and Title, in order to carry out the scheme, the Law360 report said.



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