Feds intervening in FHA loan fraud

from The Power Is Now Magazine | February 2021

The CFPB Missed a chance to fix the

Documents unsealed by a US District court judge on January 04, 2021 have shown that the US government has intervened a New York short-sale fraud case by filing a civil suit. The complaint unsealed by Judge Margo Brodie in the Eastern District of the New York alleges that the defendants engaged in the short sales of properties that had FHA-backed mortgages, which is in violation of the False Claims Act. The law suit seeks treble damages and civil penalties.

The defendants who were mentioned in the complaint as allegedly engaging in fraud with co-conspirators are Iskyo Aronov, Ron Borovinsky, Michael Konstantinovskiy, and companies they owned or controlled. Court records however show that summons were issued to all the three defendants on January 05, 2020.

According to the U.S. Attorney’s Office for the Eastern District of New York and court filings, the new complaint intervenes in a lawsuit originally brought in 2016 under the qui tam provisions of the FCA, which allow entities with evidence of wrongdoing to sue on behalf of the federal government and share in the recovery.

FEDS INTERVENING IN FHA LOAN FRAUD CASE

The defendants are faced with accusations of misleading mortgage companies into approving short sales at fraudulently depressed prices when the properties in question were actually being resold at a large profit. In a short sale, properties can be sold for less than the balance of the mortgage if the sale price represents a fair market value.

“As alleged, these defendants fraudulently obtained homes at depressed prices at the expense of a taxpayer-funded program designed to assist borrowers seeking the American dream of homeownership,” said Acting U.S. Attorney Seth DuCharme in a press release on January 04, 2021. “This office is committed to protecting the integrity of the FHA insurance program from those who try to enrich themselves through predatory mortgage fraud schemes.”

However, for some of the defendants mentioned in the suit, this wasn’t the first time. Aronov and Konstantinovskiy were also named in an indictment unsealed in 2019 alleging their involvement with coconspirators in another short-sale fraud.