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FBI Arrests Two People in Foreclosure Scheme

Dennis Norman

Dennis Norman

By: Dennis Norman

Previously I did an article on avoiding foreclosure rescue scams which have unfortunately become rather common in recent months.

This week the FBI arrested two people that the FBI alleges has done just that. I wanted to share the press release from the FBI to heighten people’s awareness of scams such as this and hopefully help prevent more victims of such scams. The press release describes in detail how they allege this scam was carried out. To read the FBI press release click here, or just read below as I have published it in it’s entirety.

FBI Federal Bureau of Investigation Newark

Press Release

For Immediate Release
August 5, 2009
FBI Newark
Contact: Special Agent Bryan L. Travers
(973) 792-3020
“Home Savers” and Misbehaviors! FBI Arrests Two in Foreclosure SchemeNEWARK, NJ—It’s the type of story that is becoming increasingly more common: FBI Special Agent In Charge Weysan Dun announced today the arrests of GARTH CELESTINE, age 44, of 535 Dean Street, Apartment 515, Brooklyn, New York; and PHIL A. SIMON, age, 34, of Brooklyn – both better known collectively as “Home Savers Consulting Corporation”. Both were arrested this morning at their residences without incident and charged with attempt and conspiracy to commit wire fraud in connection with a home foreclosure scheme. Celestine and Simon owned and operated Home Savers, which held itself out as a foreclosure rescue company, at 946 Fulton Street, Brooklyn, New York and 350 North Main Street, Freeport, New York. The company conducted business in both New York and New Jersey. According to the complaint, Celestine and Simon allegedly conspired with each other to defraud both homeowners facing foreclosure and mortgage lenders by making materially false representations and promises and causing wire transfers to perpetuate the scheme. A key aspect of the scheme was the targeted victims: homeowners with substantial equity in their homes who were facing foreclosure because of an inability to make the monthly payments. The criminal complaint specifically alleges five incidents of fraudulent mortgage loan applications generated by the defendants in August and September of 2005 for properties located in Bergenfield, Paterson and Elizabeth, New Jersey. The defendants are suspected of additional incidents in New York, but have not been charged in those matters.Based on the complaint, there were three separate groups of victims. First, there were the defrauded homeowners. Celestine and Simon would promise to help the homeowners keep their homes by avoiding foreclosure and repairing their damaged credit. The homeowners would be required to allow the title of the homes to be put in the names of “straw buyers” (third party purchasers) for one year –all with the promise of obtaining more favorable mortgages on those homes and having the title returned to them at the end of the one year period. Furthermore, Celestine and Simon allegedly told the homeowners that any equity withdrawn from their homes would be kept in escrow and used to pay the mortgages and expenses on those homes, as well as to repair the original owners’ credit.The second victim-group consisted of the straw-buyers. Celestine and Simon allegedly recruited individuals with good credit scores to act as “buyers” of the homes facing foreclosure. This was accomplished by misrepresenting to the straw-buyers that they were helping the true owners to “save” their homes. The straw-buyers were also paid a fee up to $10,000 per property in exchange for their participation in the transactions.

The third group of victims were the mortgage lenders. Based on the criminal complaint, Celestine and Simon submitted and caused to be submitted fraudulent loan applications to lenders in the straw-buyers’ names. The applications contained false personal and financial information about the straw-buyers, most importantly their income, assets, and debt. The combination of the high equity properties, the good credit ratings of the straw-buyers, the false information in the loan applications, and the promise that the straw-buyers intended to live in the homes in question all unfairly influenced the mortgage lenders into granting the mortgages. Celestine and Simon also allegedly applied to different lenders for multiple mortgages on the same properties at the same time to extract the maximum available equity from each property.

According to the complaint, Celestine and Simon attended each loan closing and controlled the payout of the loan proceeds. Once all the homeowner’s debts and other fees were paid off, the remainder of the loan proceeds was deposited in one or more of three different company accounts owned and controlled by Celestine and Simon. However, Celestine and Simon kept every penny for themselves. Furthermore, the complaint charges that Celestine and Simon eventually failed to make the mortgage payments in nearly every case and caused the loans to default. In the end, Celestine and Simon caused lenders to fund more than $10 million worth of fraudulent loans and stole $1.5 million worth of equity from the properties.

After reading the details of this scheme, one might assume Celestine and Simon were experts in the mortgage business. In fact, Simon currently cuts hair at his salon, “House of Hair” located at 615 Washington Avenue in Brooklyn, New York. This is an example as to why the public should research the credentials of anyone with whom they intend to do business in the mortgage and real estate industry.

“Let me make this crystal clear: anyone engaged in any type of mortgage fraud scheme will most definitely be investigated, caught, and prosecuted to the fullest extent of the law,” said FBI Special Agent In Charge Weysan Dun. “It is well known that the collapse of our housing market was a significant contributor to the dire economic circumstances our nation is facing.” Dun credits the mortgage fraud task force with bringing this matter to its investigative closure. Dun also thanks the FBI’s New York Field Office for their assistance.

Celestine and Simon are scheduled for an initial appearance today before the Honorable Esther Salas, United States Magistrate. If convicted, the defendants could face a maximum sentence of up to thirty years in prison, a $1,000,000 fine, or both. A criminal complaint is merely an accusation. Despite this accusation, every defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.

This case is being prosecuted by Assistant United States Attorney Donna Gallucio in the District of New Jersey in Newark.

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