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First Mortgage, executives to settle SEC fraud charges

reuters.com | June 1, 2016

California-based First Mortgage Corp and six of its executives have agreed to pay $12.7 million to settle charges of defrauding investors, the U.S. Securities and Exchange Commission said on Tuesday.

According to the SEC, the executives said loans in good standing were delinquent and pulled them from residential mortgage-backed securities guaranteed by the government corporation Ginnie Mae.

First Mortgage then sold the loans at a profit into newly issued mortgage-backed securities. That caused Ginnie Mae, which stands for the Government National Mortgage Association, to publish false and misleading prospectuses, the SEC said.

A lawyer for First Mortgage could not be immediately reached for comment. A lawyer for Chairman and Chief Executive Clement Ziroli Sr., who agreed to pay $100,000, declined to comment. Efforts to locate Senior Vice President Scott Lehrer, who will pay $50,000, were not successful on Tuesday and lawyers for other executives in the settlement could not be immediately reached.

Ginnie Mae, a corporation with the federal Department of Housing and Urban Development, promotes affordable housing by guaranteeing loans and keeping financing costs low. The SEC said FMC purposely delayed depositing checks from borrowers who had been behind on their mortgage payments, and then told investors and Ginnie Mae the loans remained delinquent.

"FMC and its senior executives abused their privileged access to Ginnie Mae’s securitization program by allowing greed to corrupt their business practices," Andrew Ceresney, director of SEC enforcement, said in a statement. "It is critical that we hold senior management fully accountable for this kind of misconduct, which we were able to accomplish here quickly due to the cooperation of company insiders.”

The managing director of FMC's servicing department, Edward Joseph Sanders, who cooperated with the investigation, agreed to disgorge $51,576.51 plus $6,811.19 in interest, according to the SEC.

The lender stopped originating loans a year ago and began winding down operations, 40 years after it was founded.

The SEC agreement was also with FMC President Clement Ziroli Jr., who will pay more than $500,000 total. Chief Financial Officer Pac W. Dong will pay a $100,000 penalty. The head of the company's capital markets department, Ronald Vargas, will pay $60,000.

(Reporting by Lisa Lambert in Washington and Suzanne Barlyn in New York; Editing by Leslie Adler and Steve Orlofsky)




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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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