First Lend America assets sold

Two foreclosed properties owned by defunct Lend America were auctioned Thursday, the first assets sold in an "involuntary bankruptcy" that has racked up $69.5 million in claims.

This comes as former president Michael Primeau awaits sentencing on bank fraud, the first criminal outgrowth in a federal investigation that led to the Melville mortgage giant's demise in 2009 and the discovery of hundreds of unfunded refinancings.

In its latest tally, upward of 350 refinancings went awry, or $53 million in mortgages, said the Government National Mortgage Association, known as Ginnie Mae, which had seized Lend America's loan portfolio.

Thursday at a Plainview hotel, investors bought a Brooklyn row house for $205,000 and a two-family house in Far Rockaway for $240,000 at a David R. Maltz & Co. auction.

But the hunt has just begun for more assets and answers.

The company, which operated in 46 states, closed in December 2009 after federal authorities filed a civil fraud suit in federal court in Central Islip and revoked its license to make loans insured by the Federal Housing Administration.

Primeau pleaded guilty in June, and the charge, filed in May by the U.S. attorney's office for the Eastern District of New York, which covers Long Island, gives the first glimpse of what went wrong. From January 2009 to February 2010 company officers directed employees to divert funds meant to pay off first mortgages at closings and use them instead for company operating expenses, the papers said.

"It's surprising to me that they were able to accomplish such devastation in a very short period of time," said Kenneth Barnard, the bankruptcy trustee.

Out of 11 creditors, the biggest, Fidelity National Title Insurance Co., filed $34.5 million in claims to cover any losses stemming from investors for the refinancings in which funds were diverted. Former Lend America loan officers put in for $30 million for unpaid wages. Travelers Casualty & Surety Co. has asked for $2.4 million.

Michael Ashley, who helped start Lend America in 2002 and was the face of the company in infomercials, has agreed to be deposed in the bankruptcy case. Ashley, who had a troubled career in the industry and pleaded guilty to wire fraud in 1993, was executive vice president.

So far, Lend America liens have been removed in about 200 refinancings, said Ginnie Mae executive vice president Mary Kinney: "Each one is very complicated."

It's too late for Philadelphia retiree Joseph Caracappa, who refinanced with Lend America in October 2009. Only this month did he succeed in getting its lien off his property -- too late to refinance to fund his daughter's wedding Friday.

The Vietnam War veteran said his "full-time" fight on the lien was "frustrating."

"It was like I'm wounded and thousands of helicopters are going by," he said, "and nobody could pick me up."