United States Resolves Civil Fraud Suit Against Melville-Based Mortgage Lender
February 21, 2017 / Source: FDIC Office of Inspector General
Robert L. Capers, United States Attorney for the Eastern District of New York, Christina D. Scaringi, Special Agent in Charge, North East Region, Office of the Inspector General for the Department of Housing and Urban Development, and Jay N. Lerner, Inspector General for the Federal Deposit Insurance Corporation announced the settlement of claims against Franklin First Financial, Ltd., its Chief Executive Officer, Frederick Assini, its Chief Operating Officer, Christopher Bertman, and Andrew Dauro, a manager of the company. The case, United States v. Rainy Day Holdings, LLC. et al., Civil Action No. CV-15-5576 is pending in federal court in Central Islip, NY before United States District Judge Joseph F. Bianco.
Franklin First, Assini, Bertman, and Dauro participated in the Direct Endorsement Program, a United States Department of Housing and Urban Development (HUD) program that allowed Franklin First to make mortgage loans which were insured by the Federal Housing Administration (FHA) in the event of default. If the FHA determined that Franklin First’s mortgages defaulted within the first two years at a rate 100% or higher than other lenders within the same geographic region, the FHA could have audited, immediately suspended, or sought to permanently remove Franklin First from the Direct Endorsement Program. As alleged in the government’s complaint, the defendants made surreptitious mortgage payments for borrowers on at least one hundred eleven FHA-insured loans that otherwise would have become delinquent or gone into default within two years of origination by Franklin First. As a result, the defendants deprived HUD of critical loan performance information needed to determine whether Franklin First should remain eligible for participation in the Direct Endorsement Program.
In addition, the defendants concealed from HUD the fact that Franklin First was making the loan payments by funneling the payments through a purported charitable organization, the Rainy Day Foundation. In the stipulated consent decree, Franklin First, Assini, Bertman, and Dauro admitted to making the improper payments and that the payments altered the company’s delinquency and default rates. Franklin First, Assini, Bertman, and Dauro agreed to pay one million, two hundred fifty-thousand dollars ($1,250,000) to resolve the United States’ claims. With the resolution of the claims against Franklin First, Assini, Bertman, and Dauro, the total settlements arising out of the Rainy Day Foundation matter are $2.399 million.
“This resolution demonstrates our Office’s vigorous pursuit of those who would abuse federal mortgage programs, whether they be companies or individuals. The significant penalty and defendants’ admissions to wrongdoing help to restore the integrity of the FHA mortgage insurance program,” stated United States Attorney Capers. “We would like to thank HUD’s Office of the Inspector General, HUD’s Office of Program Enforcement, and the FDIC Office of the Inspector General for their outstanding work and continued support in investigating this matter.”
Special Agent in Charge Scaringi stated, “This settlement is the latest example of our continued commitment to hold mortgage industry professionals accountable for their actions and should prove to the public that the HUD OIG and the U.S. Attorney's Office remain steadfast in our efforts to root out deceptive practices that victimize the FHA.”
FDIC Inspector General Lerner said, “The FDIC OIG is pleased to support the Department of Justice and the Department of Housing and Urban Development in bringing about today’s settlement. By working together, we broaden the government's efforts to pursue damages resulting from misconduct. The civil penalties imposed today send a strong message that fraudulent practices like those committed by the principals of Franklin First will not be tolerated.”
The United States’ case in this matter is being litigated by Assistant United States Attorneys Edward Newman, John Vagelatos, and Robert Schumacher.Franklin Settlement Agreement