The owners and co-founders of a Massachusetts short sale assistance company stand accused of defrauding Fannie Mae, Freddie Mac, the Department of Housing and Urban Development, and others on nearly 100 short sale transactions in a scheme to “steal undisclosed and improper fees.”
According to the Attorney’s Office for the District of Massachusetts, Gabriel Tavarez and Jaime Mulvihill founded and operated Loss Mitigation Services, a company that negotiated with lenders and mortgage guarantors approval of short sales in lieu of foreclosure.
A short sale occurs when the mortgage debt on the home is greater than the sale price, and the lender or mortgage owner agrees to take a loss on the transaction.
Court documents show that Loss Mitigation Services supposedly acted on behalf of underwater homeowners to conduct a short sale on their house.
Typically, lenders and mortgage guarantors forbid short sale negotiators from taking any proceeds from the short sale.
But, the authorities claim that that is exactly what Tavarez and Mulvihill did.
According to the court documents, from 2014 to 2017, Tavarez and Mulvihill allegedly falsely claimed to homeowners, real estate agents, and closing attorneys that lenders had agreed to pay Loss Mitigation Services fees known as “seller paid closing costs” or “seller concessions” from the proceeds of the short sales.
But, the court documents state that the lenders made no such promises.
But as a result of Loss Mitigation Services’ alleged actions, when the short sales closed, settlement agents paid Loss Mitigation Services the fees in question, which were typically 3% of the short sale price, above and beyond any fees to real estate agents, closing attorneys and others involved in the transaction.
According to court documents, in order to deceive the lenders or guarantors about the nature of the short sale payouts, Tavarez or Mulvihill allegedly filed false short sale transaction documents, including altered settlement statements, fabricated contracts, and mortgage preapproval letters.
Additionally, Tavarez allegedly created fake letters from mortgage brokers claiming that the brokers had approved buyers for financing, in order to convince lenders to approve the additional fees.
In total, the scheme allegedly defrauded lenders and investors out of nearly $500,000 in proceeds on about 90 short sale transactions.
Tavarez and Mulvihill are both charged with conspiracy to commit wire fraud, while Tavarez was also charged with aggravated identity theft.
The charge of conspiracy to commit wire fraud carries a sentence of up to 20 years in prison, three years of supervised release, and a fine of $250,000 or twice the gross gain or loss. The charge of aggravated identity theft carries a mandatory two-year sentence that must run consecutively to any other sentence imposed, one year of supervised release, and a fine of $250,000, or twice the gross gain or loss.