In another case stemming from the mortgage industry's Wild Wild West days, the former owner and CEO of a New York mortgage bank will spend the next 150 months in prison after being convicted of a $100 million mortgage fraud scheme that cost financial institutions $30 million.
According to the U.S. Attorney’s Office for the Eastern District of New York, Aaron Wider is the former owner and CEO of HTFC Corporation, a mortgage bank located in Garden City, New York. Wider ran the company from 2003 to 2008.
HTFC was a residential mortgage originator, but did not fund the mortgages itself. Instead, the company relied on warehouse lenders for its mortgage funds.
As part of the company’s arrangement with warehouse lenders, the lenders relied on Wider and HTFC to ensure that homebuyers were financially able to pay the mortgages and that the market value of the homes fully collateralized the loans, the U.S. Attorney’s Office said.
But, according to the authorities, Wider and HTFC took advantage of the lenders’ trust to the tune of $100 million in fraudulently obtained funds.
During Wider’s time at HTFC, he and his co-conspirators engineered a series of “same-day sham” transactions to artificially inflate the prices of homes.
According to the U.S. Attorney’s Office, Wider and others contracted to buy homes in Nassau and Suffolk counties from “innocent sellers” at market prices.
But, instead of submitting true loan documentation to the company’s warehouse lenders, they provided fraudulent loan applications and appraisals to the warehouse lenders that nearly doubled the true sales prices of the homes.
Additionally, the U.S. Attorney’s Office said that Wider and others inflated their personal assets, used straw purchasers and sham trust entities, and hid “significant liabilities” all to get loan approval.
Thanks to their scheme, Wider and his associates typically obtained proceeds for 80% to 100% more than the actual value of the homes.
HTFC then sold the fraudulent mortgages into the secondary market. As many others did, quite a few of HTFC’s mortgages went into foreclosure beginning in 2007 and 2008.
It was only then that the secondary market investors discovered that the actual value of the collateral was far less than the amount borrowed for each home.
As a result of this scheme, Wider was able to fraudulently obtain more than $100 million in loan proceeds, causing more than $30 million in losses to financial institutions, the U.S. Attorney’s Office said.
Wider was convicted on Jan. 25, 2016, of conspiracy to commit bank fraud and this week, he received a sentence of 150 months in prison. Additionally, the Court ordered Wider to pay $22,487,799 in forfeiture and restitution and ordered him to serve five years’ supervised release at the conclusion of his time in jail.
“Aaron Wider perpetrated a massive mortgage fraud scheme, the effects of which are still felt to this day by financial institutions and homeowners,” stated Acting United States Attorney Rohde. “Today’s sentence sends a strong message that those who manipulate and abuse the lending process will be held accountable.”
William Sweeney, the Assistant Director in Charge of the Federal Bureau of Investigation’s New York Field Office, said that Wider’s scheme had far-reaching consequences.
“Wider’s scheme won him millions of dollars in profits and delivered a crushing blow to the financial institutions who became unwitting players in this game,” Sweeney said. “But as we know, banks aren't the only victims in these types of fraud-for-profits scams. A compromised banking system, which threatens both the stability of our economy and the safety of our assets, is a risk to us all. Today's sentence is a reminder of our commitment to put an end to this type of crime.”