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'via Blog this'A CHINATOWN bank scored hundreds of millions of dollars in fraudulent bank loans by encouraging unqualified applicants to lie on their mortgage applications, the Manhattan district attorney said Thursday.
Abacus Federal Savings Bank and 19 employees were accused of securities and mortgage fraud, falsifying business records and other charges in what District Attorney Cyrus Vance called a “systematic scheme to falsify and fabricate loan applications” to Fannie Mae.
The fraud occurred between 2005 and 2010, prosecutors said. The applicants — mostly immigrants who work in restaurants, nail salons and other cash-only businesses — were encouraged to inflate their income and lie about their employment to qualify for the loans, according to the indictment.
Once the loan was approved, the bank bundled the loans and sold them to Fannie Mae.
The bank is stable, and depositors' money isn't at risk, prosecutors said.
Abacus said it was stunned by the charges because it had investigated the matter, informed Fannie Mae and taken action, including firing some employees. Others resigned.
Neither Fannie Mae nor any borrower was harmed, the bank said, adding that it had eschewed subprime mortgages and other risky lending practices vilified during the financial crisis.
Loan officers coached borrowers – many of whom worked in nail salons, restaurants and other all-cash businesses – on inflating their incomes and job titles and falsifying job-verification forms, prosecutors said.
The crisis has spurred lawsuits and regulatory action against banks; Abacus agreed in February 2011 to enhance training, do a risk assessment and take other steps as part of an agreement with the federal Office of Thrift Supervision, which said the bank's loan underwriting and documentation practices were inadequate. The agency is now part of the Office of the Comptroller of the Currency.
But criminal cases against banks have been few – a dearth that has prompted commentary and criticism from activists, academics and others.
At Abacus, managers created an environment of doctoring mortgage applications to match Fannie Mae criteria, prosecutors said.
Loan officers coached borrowers – many of whom worked in nail salons, restaurants and other all-cash businesses – on inflating their incomes and job titles and falsifying job-verification forms, prosecutors said.
Loan processors helped out by calculating how much income the borrowers would need to have in order to qualify, and underwriters approved loans they knew were based on phony data, according to prosecutors.
The bank made millions of dollars in fees off the more than 4,000 dubious loans, and the employees did well, too: Some loan officers made as much as $300,000 a year, prosecutors said.
Eight ex-employees already have admitted guilt. Eleven others, including former chief credit officer Yiu Wah Wong and loan origination supervisor Wai Hung "Raymond" Tam, pleaded not guilty Thursday to various charges. The company also entered a not guilty plea.
Wong, 61, "looks forward to the opportunity to clear his name," said his lawyer, Sanford Talkin. Tam's lawyer, Thomas C. Rotko, said the 57-year-old maintained his innocence and was looking forward to addressing the charges.
The bank is stable, and depositors' money isn't at risk, prosecutors said.
Abacus said it was stunned by the charges because it had investigated the matter, informed Fannie Mae and taken action, including firing some employees. Others resigned.
Neither Fannie Mae nor any borrower was harmed, the bank said, adding that it had eschewed subprime mortgages and other risky lending practices vilified during the financial crisis.
"Our conduct in this regard has been exemplary," Abacus said in a statement that accused prosecutors of overreaching. The 27-year-old bank, which has about $250 million in assets and 117 full-time employees, also questioned why a community bank is facing charges "when many other banks that contributed to the national economic crisis remain untouched."
Vance said that while many banks have come under scrutiny from various authorities, prosecutors found in Abacus extensive and powerful proof of a systemic, repeated fraud that rose to the level of crime. The charges entail demonstrating that defendants had criminal intent, made material financial misstatements and other elements.
"We have to deal with each case on the facts that we have them," Vance said. "The answer to `why in this case?' is: Because it had to be done."
He declined to say whether his office was investigating o
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