U.S. suit accuses Great Neck firm of mortgage fraud
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The U.S. attorney in Manhattan sued a Great Neck mortgage company and its chief executive, accusing them of mortgage fraud.
The lawsuit said Golden First Mortgage Corp. and its owner, David Movtady, knowingly approved bad loans that would be insured by the Federal Housing Administration, and then filed insurance claims when the loans defaulted, leaving the government to pick up the tab.
The company "churned out bad loans and lied about their compliance . . . leaving taxpayers on the hook for millions of dollars when the loans inevitably defaulted," said U.S. Attorney Preet Bharara in a news release announcing the action Thursday.
The government is seeking civil penalties, compensatory damages and triple damages.
Sam Rosenberg, Movtady's attorney, could not be reached for comment.
Since 2007, the government estimates that it has paid nearly $12 million in insurance claims for defaulted loans issued by Golden First, with the figure likely to increase as more claims are processed.
From 2002 to 2010, more than 60 percent of the loans the company approved defaulted, the lawsuit said. The suit also said Golden First employees were rewarded for speedy approval of loans, and disregarded processes such as due diligence.
Golden First operated as a Direct Endorsement Lender -- meaning it was able to underwrite mortgages and certify them for FHA insurance -- from 1989 to 2010.
The case is part of the government's effort to crack down on lenders it believes contributed to the U.S. housing crisis by issuing risky home loans.
Wells Fargo & Co., the largest U.S. mortgage lender, is seeking to dismiss a similar lawsuit.
In 2009, Lend America, a Melville-based mortgage lender and, at the time, one of the largest generators of FHA-insured loans on Long Island, shut down after the U.S. attorney sued, accusing the company of defrauding the government in a similar way to Golden First.With Reuters