Remember These Guys?

"National City Mortgage and Huntington National Bank are in hot water after wrongly offloading $265 million in bad mortgages to the Federal Housing Administration. Government audits claim the two lenders shifted mortgages with delinquency histories to the FHA’s insurance program."

"The transfers could be considered fraudulent because each lender certified there were no delinquency problems with the loans in question. Such fraud would result in fines, the loans being rescinded, or reimbursement of any losses incurred by FHA."

"The audits recommend each Ohio-based company take back the loans, which would include 529 National City loans worth $263.5 million and 14 Huntington loans worth $1.4 million. The two also are urged to reimburse the FHA for loans that already defaulted -- 102 National City loans went bad, costing the FHA $5.5 million, while two Huntington mortgages, totaling $228,000, defaulted."

"The audit also argues for imposing fines on the banks for administrative fraud.
The Department of Housing and Urban Development, which manages the FHA, is investigating the claims. National City said it is working with HUD, while Huntington declined to comment."

Other news involving National City Mortgage:

"Mark Douglas Lattimore was sentenced to 20 months in prison and ordered to pay more than $660,000 in restitution after pleading guilty to conspiracy to commit mail fraud in a mortgage lending scheme in South Carolina. Lattimore, formerly managing partner of the Greenville, South Carolina law firm of Forquer, Green and Lattstimore, also has had his license to practice law suspended."

"Prosecutors say Lattimore closed on 88 inflated home loans after the fraudulent mortgages were arranged by Anderson mortgage brokers at Service First Mortgage and the Kelly Mortgage Group. Both companies have been shut down, and more than a dozen of their brokers and appraisers were convicted of conspiracy to commit mail fraud The scheme is believed to have involved more than 120 properties in the Upstate. The known lender was National City Mortgage Co."

Still More...

TITLE COMPANY EMPLOYEE PLEADS GUILTY TO TRANSPORTING FUNDS OBTAINED BY FRAUD

"KANSAS CITY, Mo. – Bradley J. Schlozman, United States Attorney for the Western District of Missouri, announced that a former employee of an Independence, Mo., title company pleaded guilty in federal court today to transporting funds obtained by fraud."

"Daryl Ann Daniel, 51, of Independence, Mo., pleaded guilty before U.S. District Judge Howard F. Sachs this morning to charges contained in a May 16, 2006, federal indictment.

'“This defendant was an indispensable cog in the largest mortgage fraud scheme ever prosecuted in this district,” Schlozman said."

'“She took advantage of her position of trust to defraud a number of financial institutions, which in turn severely impacted many low-income neighborhoods in Kansas City when these loans inevitably went bad. The abandoned properties caused by this fraud continue to invite more crime and blight, and the entire community suffers as a result.”'

"By pleading guilty today, Daniel admitted that she was involved in a mortgage fraud scheme with Brent Michael Barber, 41, of Belton, Mo., who has been convicted at trial and pleaded guilty in separate but related cases of mortgage fraud that included hundreds of fraudulent loans that resulted in losses of nearly $12 million by the financial institutions."

"Daniel was employed as a loan closer at Realty Title Co. in Independence and invested in real estate. During 2000 and 2001, Barber used Realty Title – primarily working with Daniel – to handle his real estate closings. Daniel was the closer assigned to handle 243 of Barber’s property closings (94 percent of the 259 Barber properties) and obtained fees, commissions and other payments as a result."

"Daniel admitted that she handled the closings for several properties being sold by Barber’s company, National Foreclosure Properties LLC, to a straw party. Daniel signed settlement statements, which were submitted to the lender, attesting that the buyer of the property brought funds to the closing."

"In reality, Barber (or a co-conspirator) delivered cash and money orders to Daniel equal to the amount the buyer was supposed to pay at closing. Relying on those false statements, National City Mortgage Co., d/b/a Commonwealth United Mortgage Co., funded the loans and sent funds in interstate commerce in the form of checks that were deposited to the bank account of Realty Title."

"Daniel also admitted that she conspired with Barber and others in a fraud scheme to sell rental property she owned in Independence. That scheme involved an inflated appraisal of the property that misrepresented its condition, an inflated sale price, and a loan application containing false and fraudulent representations."

"This case was prosecuted by Assistant U.S. Attorney Linda Parker Marshall. It was investigated by the Federal Bureau of Investigation and IRS-Criminal Investigation."

...And They Put Lipstick on the Pig and Sold it

"Merrill Lynch (MER) announced Tuesday that it plans to acquire the mortgage business of Cleveland-based National City (NCC) for $1.3 billion."

"Merrill Lynch said the deal would give it control of National City's First Franklin Financial mortgage origination franchise, which is based in San Jose, Calif. Merrill Lynch also will get National City's affiliated business units, National City Home Loan Services and NationPoint."

"Last month, National City said it is buying Fidelity Bankshares, which is based in West Palm Beach, Fla., for an estimated $1 billion. Only weeks earlier, National City said it would buy Harbor Florida Bancshares, based in Fort Pierce, Fla., through a $1.1 billion stock deal."

'"These leading mortgage origination and servicing franchises will add scale to our platform and create meaningful synergies with our securitization and trading operations," Dow Kim, president of Merrill Lynch's Global Markets and Investment Banking Group, said in a statement."

'"This transaction accelerates our vertical integration in mortgages, complementing the three other acquisitions we have made in this area and enhancing our ability to drive growth and returns."'

"Andrew Pollock, president and chief executive of First Franklin, said he is looking forward "to working with Merrill Lynch to build a premier mortgage banking franchise."'

"Merrill Lynch said it planned to operate the acquired businesses under their current names, as distinct units."

"The transaction, subject to regulatory approval, is expected to close in the fourth quarter of 2006."