A Regions Bank branch manager and 19 others have been accused by federal prosecutors of operating a $40 million mortgage fraud scheme in Miami. It was reported that Ivette Carreno, a manager at Regions, was instrumental in getting fraudulent loans approved. An indictment was returned last month in U.S. District Court in South Florida. Ms. Carreno and the others face 30 years in prison on each count they face if they are found guilty.
According to Birmingham-based Regions Financial Corp., the largest bank based in Alabama, it says it first discovered the fraud and reported it to authorities. It should be noted that the bank itself hasn’t been accused so far of any criminal wrongdoing. Regions could have civil exposure on the $20 million in bank losses stemming from the fraudulent and uncollectable loans. There are other lenders mentioned in the indictment, but none of them are Defendants. Those are IndyMac Bank, Flagstar Bank, Washington Mutual Bank and HSBC Mortgage Corp.
Prosecutors said the fraud started in 2006 and continued to 2008. About 200 home equity lines of credit were secured under false pretenses. The proceeds of the wrongdoing were shared among the almost two dozen participants. So it appears this didn’t just happen overnight and certainly wasn’t isolated in scope. Also of note was the depth of participation, requiring conspiracy among people in almost every facet of the real estate industry. That’s a very sad commentary when you consider who all is affected by the wrongdoing. The accused include the bank officer Carreno, mortgage brokers, a title agent, a home appraiser and several sales representatives. Concerning the conduct, prosecutors said in a statement:
Even by South Florida fraud standards, today’s prosecution is shocking. Never before have we seen so many real estate and bank industry professionals charged in a single indictment.
Otherwise, the fraud was said by the prosecutors to be pretty much straightforward. Properties were identified for purchase and people were recruited to file mortgage applications that included phony income, employment and credit-history information. Obviously, this sort of thing can’t happen unless individuals working in the various fields, including the bank, actively participated in the fraud. Also, others in management roles in the bank have to be almost blind to what’s going on.
It was alleged that the cooperation of appraisers and mortgage originators was purchased with bribes. The bank manager, Carreno, was paid to see that the loan applications were approved. Applications in some cases were for credit lines on properties that weren’t even owned by the applicants. Regions operates 81 branches in the Miami metro area, giving it a 3 percent deposit market share, according to the Federal Deposit Insurance Corp. The company has 1,800 branches in 16 states, and is the Birmingham metro area’s largest private-sector employer, with 6,000 workers. Regions says it’s working to eliminate such actions. The bank says since it uncovered this fraud, it has “further strengthened” its internal controls “in order to swiftly deter and identify questionable mortgage practices.” Nevertheless, this situation is just another example of how bad things have been in our banking system.