The former vice president and comptroller of a New York bank is facing charges that he took part in a scheme that defrauded warehouse lenders out of $12 million during the financial crisis.
According to the U.S. Attorney’s Office for the Southern District of New York, John Reimer is charged with bank fraud and mortgage fraud for his participation in a scheme that allegedly defrauded lenders of money that was intended for individuals seeking mortgages to purchase or refinance their homes.
Reimer was arrested late this week in Florida.
The indictment alleges that Reimer served as the vice president and comptroller of an unnamed bank and used his position to submit false and fraudulent documentation and representations to a number of unidentified warehouse lenders as part of a scheme to defraud the lenders out of millions.
According to the indictment, Reimer’s alleged conduct took place between 2008 and 2009.
In his role at the bank, Reimer was responsible for providing the warehouse banks with the information and documents necessary to obtain the warehouse funding lines.
In warehouse lending, a bank or mortgage company will originate a mortgage, but use money from a warehouse lender to fund the loan itself. Then, once the loan is closed and funded, the loan is sold to an investor. The proceeds from that sale are then used to repay the warehouse lender for the advance.
But, the indictment states that Reimer allegedly “double-pledged” certain properties, meaning that he obtained multiple warehouse advances from more than one warehouse lender by misleading each lender into thinking that the underlying loan was fully collateralized by the underlying property.
The indictment also alleges that Reimer falsely represented to the warehouse banks that the loans in question were going to close immediately. Instead, the loans did not close immediately, and in some cases, did not close at all.
But the bank kept the warehouse funds regardless. In some cases, the loans did close, but the bank used the warehouse funds to repay previous warehouse advances.
According to the indictment, as part of the scheme, Reimer provided the warehouse banks with fraudulent documents, including mortgage notes that included fake signatures of the supposed borrowers, allegedly forged by Reimer himself.
All told, from November 2008 through January 2009, Reimer allegedly used fraudulent misrepresentations to cause the warehouse lenders to provide the bank with at least $12 million.
While the indictment does not identify which bank Reimer worked at, it appears that he was employed at 1st Republic Mortgage Bankers during the time in question.
A lawsuit filed by Ally Bank in 2009 identifies John Reimer as a named defendant and an employee of 1st Republic.
One of the causes of action in the lawsuit alleged that Reimer received and still possesses certain warehousing advances made by Ally to 1st Republic. The lawsuit claimed that the money in question “rightfully belonged” to Ally.
A 2011 ruling in the case awarded nearly $8.4 million to Ally from Reimer.
Additionally, a 2008 settlement between the Connecticut Department of Banking and 1st Republic is signed by “John Reimer,” who is listed as a vice president and the bank.
Also, in 2009, the State of New York Banking Department, a predecessor of the New York Department of Financial Services, suspended 1st Republic’s mortgage banking license after an investigation found that the bank “engaged in dishonest and inequitable practices.”
While the order does not identify any specific individuals as the source of the “dishonest and inequitable practices,” the actions alleged by the order are similar to the conduct Reimer is accused of participating in.
The order states that in early 2009, the Banking Department was “advised that a warehouse line provider discovered improprieties in 1st Republic’s warehouse line accounts, including the double-booking of loans, the pledging of unclosed loans, and the failure to properly disburse loan proceeds.”
One week after being notified about the alleged improprieties, 1st Republic’s general counsel told the regulator that “definite improprieties by an officer of the corporation had been discovered and that federal authorities were investigating the matter.”
The order states that during an onsite visitation conducted on Jan. 27, 2009, it was discovered that 1st Republic closed 13 loans totaling $4,659,318 on New York properties where the loan proceeds were not disbursed.
A business listing with the West Virginia Secretary of State also notes “John Reimer” as the vice president of 1st Republic.
According to this listing from Bloomberg, 1st Republic closed in 2014 after undergoing a Chapter 7 liquidation. The company appears to have no active website and no social media presence of any kind. A LinkedIn page for the company is basically empty, and lists only 9 people as former employees.
Reimer is charged with one count of bank fraud and one count of wire fraud, each of which carries a maximum sentence of 30 years in prison.
“As alleged, John Reimer, vice president of a mortgage bank, defrauded several other financial institutions of more than $12 million,” Acting U.S. Attorney Joon Kim said.
“Reimer allegedly falsified documents, kept funding for mortgages that never closed, and even acquired funding multiple times for the same loans as part of the scheme,” Kim added. “Fraud schemes that target money intended for home loans can taint the market for honest homebuyers seeking to secure mortgages. We will continue to work with our law enforcement and regulatory partners to ensure that schemes like the one charged here are stopped.”