The owners of a Chicago-area mortgage brokerage are accused of operating an appraisal management company in order to influence appraised values on fraudulent loans.
Schaumburg, Illinois-based American Financial Mortgage Services Inc. was founded in 1993 by
Steven L. Garcia and his brother, Michael R. Garcia.
Aside from its main office, the company operates branch locations in
Dallas and in the Phoenix suburb of Mesa, Arizona. It also makes loans in California and Florida.
In addition to American Financial, the brothers operate, through a nominee, Residential Appraisal Management Company Inc., a purportedly independent appraisal firm, according to a news release Thursday from the U.S. Attorney’s Office for the Northern District of Illinois.
In fact, the statement said, “the Garcias and American Financial employees selected the appraisers, managed the appraisal process, influenced property valuation and paid the appraisers.”
Such actions violate
Federal Housing Administration regulations, which prohibit brokers from having substantive communications with appraisers relating to valuation of properties, including ordering or managing an appraisal assignment, and from paying appraisers.
“The Garcias fraudulently used RAMCI to steer appraisals to hand-picked appraisers, including a relative of the Garcias, who would provide an appraised value sufficient to support a proposed loan, while falsely representing to lenders that RAMCI selected appraisers based on experience and skill,” the Department of Justice claims.
Based on the allegedly fraudulent valuations — as well as false employment and income information — wholesale lenders made fraudulent loans where the Garcias and their nominees allegedly purchased and re-sold properties at inflated prices to unqualified borrowers who defaulted on the loans.
In all, the defendants are accused of
fraudulently obtaining around $1.9 million that was disbursed at the closings in addition to $274,000 in commissions.
Toni Bright, who is the chief compliance officer at CoesterVMS.com Inc. in Rockville, Maryland, noted in a written statement that
her company welcomes extreme vetting by lenders to assure they are properly protecting the appraiser and the lender in the process.
She recommends that only AMCs with no associations or ties to the lenders are utilized. She said only AMCs that allow open-panel selection should be hired. Lenders should also ensure that loan originators
do not have the ability to request specific appraisers.
Steven and Michael Garcia have each been charged with one count of mail fraud and one count of wire fraud. Each count is punishable by up to 30 years in prison.
No arraignment has yet been scheduled.
