The founder and president of a now-defunct mortgage company could spend 20 years or more in prison for allegedly diverting nearly $3 million away from Ginnie Mae and into secret bank accounts to use the money himself.
According to the U.S. Attorney’s Office for the District of Massachusetts, Robert Pena, 67, the president and founder of mortgage company Mortgage Security, Inc. is facing charges of conspiracy and wire fraud.
The charges stem from a scheme that involved Pena allegedly shifting money paid by borrowers into his own accounts instead of forwarding the money on to Ginnie Mae.
According to court documents, MSI was contracted with Ginnie Mae to pool eligible residential mortgage loans and then sell Ginnie Mae-backed mortgage bonds to investors.
The U.S. Attorney’s Office stated that MSI was responsible for servicing the loans in the pools it created, which included collecting principal and interest payments from borrowers, as well as loan payoffs, and placing those funds into accounts held in trust by Ginnie Mae, which would ultimately pass them along to investors.
According to the indictment, beginning in 2011, Pena began diverting money that borrowers were sending to MSI.
Specifically, Pena is accused of depositing large-dollar, loan-payoff checks into “secret accounts” that Ginnie Mae was unaware of and then using those funds for his own personal and business uses.
According to court documents, Pena also diverted borrowers’ escrow funds and mortgage-insurance premiums for his own use.
In total, Pena allegedly took nearly $3 million, which Ginnie Mae said it had to pay the investors whose investments it had guaranteed.
According to court documents, Pena also attempted to cover up his scheme by providing false reports to Ginnie Mae about the status of the loans MSI was servicing. Ginnie Mae requires issuers like MSI to provide regular reports to Ginnie Mae concerning the status of the loans in the pools.
For the charge of conspiracy, Pena is facing a sentence of no greater than 20 years in prison, three years of supervised release and a fine of $250,000 or twice the gross gain or loss.
And for the charge of wire fraud, Pena is facing a sentence of no greater than 20 years in prison, three years of supervised release and a fine of $250,000 or twice the gross gain or loss.
As Bloomberg’s Matt Scully put it: This is why you don’t mess with Ginnie.