A servicer of loans held in mortgage-backed securities has admitted that he withheld proceeds from Wells Fargo Bank on fully paid loans and instead made monthly payments while providing bogus monthly statements showing the loans as unpaid.
U.S. Mortgage, which is not related to U.S. Bancorp subsidiary U.S. Bank Home Mortgage, serviced MBS loans under a contract it had with Wells Fargo.
In addition to passing on monthly payments, the Las Vegas firm was obligated to forward proceeds from any loan payoffs to Wells Fargo.
U.S. Mortgage was also required to provide monthly statements to Wells Fargo that included, among other things, the principal balance.
But, beginning in 2004, U.S. Mortgage began withholding payoffs from Wells Fargo, according to a news release from the U.S. Attorney’s Office for the District of Nevada.
By the time the scheme concluded in 2009, more than $8 million in loan payoffs had accumulated.
Former U.S. Mortgage president and chief executive officer Earl L. Gross pled guilty on June 12 to hiding the paid status from Wells Fargo by submitting reports that showed numerous borrowers still paying on loans that were, in fact, paid in full.
In addition to stealing the proceeds, U.S. Mortgage continued to collect servicing fees on paid loans.
U.S. Mortgage had its license as a residential lender and servicer revoked by the California Department of Corporations in February 2004. The Nevada Secretary of State reports that a “registered agent resignation” took place in July 2007.
Gross pleaded guilty on one count of bank fraud and agreed to forfeit $8,440,439.
Gross, 75, faces up to 30 years in prison when he is sentenced on Sept. 19.
