Feds Charge North Andover ‘Short Sale’ Firm with $500,000 Fraud Scheme

John Joseph Moakley United States Courthouse. (Beyond My Ken, CC.)

The operators of a North Andover mortgage short sale assistance company were charged Friday in federal court with defrauding mortgage lenders and investors out of nearly $500,000.

Gabriel T. Tavarez, 39, and Jaime L. Mulvihill, 40, who founded Loss Mitigation Services were charged with conspiracy to commit wire fraud. Tavarez also was charged with aggravated identity theft. The charges involve proceeds from about 90 short sale transactions, allegedly defrauding the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation and U.S. Department of Housing and Urban Development.

U.S. Attorney Andrew E. Lelling’s office said the charges arise out of the pair’s alleged scheme to steal undisclosed and improper fees from mortgage lenders in connection with short sales of homes. A short sale occurs where the mortgage debt on the home is greater than the sale price, and the mortgage lender agrees to take a loss on the transaction.

Loss Mitigation Services, purportedly acting on behalf of underwater homeowners, negotiated with mortgage lenders for approval of short sales in lieu of foreclosure. Mortgage lenders typically forbid short sale negotiators, such as Loss Mitigation Services, from receiving any proceeds of a short sale.

According to the court documents, from 2014 to 2017, Tavarez and Mulvihill, directly or through their employees, falsely claimed to homeowners, real estate agents and closing attorneys that mortgage 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. In reality, the mortgage lenders never approved Loss Mitigation Services to receive those fees.

When the short sales closed, at the instruction of Tavarez or Mulvihill, or others working with them, settlement agents paid Loss Mitigation Services the fees, which typically were 3% of the short sale price above and beyond any fees to real estate agents, closing attorneys and others involved in the transaction. To deceive mortgage lenders about the true nature of the fees, Tavarez or Mulvihill filed, or caused others to file, false short sale transaction documents with mortgage lenders, including altered settlement statements and fabricated contracts and mortgage loan preapproval letters. In addition, Tavarez created fake letters from mortgage brokers claiming that the brokers had approved buyers for financing, in order to convince mortgage lenders to approve the additional fees.

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