NEW YORK—A bank and 19 of its former employees allegedly falsified mortgage documents to get hundreds of millions of dollars in loans from Fannie Mae, according to an indictment announced Thursday by Manhattan District Attorney Cyrus R. Vance Jr.
Eight of the former employees have already admitted guilt.
A two-and-a-half-year investigation uncovered rampant deceptive practices by Abacus Federal Savings Bank, which was founded in 1984 by Chinese in New York City and has since expanded into New Jersey and Pennsylvania.
Abacus staff faked residential mortgage applications—including telling borrowers to falsely put higher income, assets, and job titles on forms—so they could garner “many millions of dollars in loan origination, purchasing, and servicing fees,” states the district attorney’s release.
The documents, sold to Fannie Mae, let unqualified borrowers get loans. “Fannie Mae repackaged them into mortgage-backed securities and sold them to outside investors. As a result of the hundreds of millions of dollars in charged fraudulent loans, Abacus earned many millions of dollars in loan origination, purchasing, and servicing fees,” states the district attorney’s release.
Abacus in a statement said, “The only victim in this matter is the bank itself.”
“Neither Fannie Mae nor the borrowers were ever harmed,” it stated, adding that two years ago, after discovering irregular practices, it had conducted an internal investigation and fired all the involved employees that didn’t resign. No senior executives were engaged in the illegal behavior, Abacus said.
However, the district attorney named the banks former vice president and most senior loan department manager, and the loan origination supervisor in the indictment, saying that the two managers trained lower level employees to think that the accuracy of loan application information was unimportant.
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