Reuters: Financial Services and Real Estate: UPDATE 1-Abacus Federal Savings Bank indicted for mortgage fraud

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UPDATE 1-Abacus Federal Savings Bank indicted for mortgage fraud May 31st 2012, 15:51 Thu May 31, 2012 11:51am EDT By Karen Freifeld NEW YORK May 31 (Reuters) - Abacus Federal Savings Bank, which caters to Chinese immigrants in and around New York City, has been charged with selling fraudulent mortgage loans to Fannie Mae in a 184-count indictment. The bank's employees conspired to falsify loan applications to meet the requirements of the Federal National Mortgage Association, commonly known as Fannie Mae, Manhattan District Attorney Cyrus Vance said on Thursday. The scheme resulted in the sale of hundreds of millions of fraudulent loans to Fannie Mae between 2005 and 2010. Nineteen employees of the bank also were charged in the case, eight of whom have pleaded guilty, the District Attorney's office said in a statement. The charges include grand larceny, conspiracy, residential mortgage fraud and falsifying business records. Sean Hughes, a spokesman for Abacus, said the bank would issue a statement later in the day. Widespread mortgage fraud led to the financial crisis in 2008. Law enforcement authorities have been criticized for their failure to bring criminal charges against major banks for the roles they played in causing the crisis. Ironically, the deceptive loans Abacus sold to Fannie Mae have not defaulted. "The irony of this case is the majority of the loans originated by Abacus have continued to perform, which means the monthly mortgage payments are being made by the borrowers," Vance said at a press conference in lower Manhattan. The defective loans falsely represented details regarding credit-worthiness, employment status and income, and the source of down payments, Vance said. "These alleged actions in this case are egregious," said Steve Linick, inspector general of the Federal Housing Finance Agency, which oversees Fannie Mae, at the press conference. "Poor quality loans are at greater risk of default." Some of the fraudulent Abacus loans were securitized into mortgage-backed securities and sold to investors, Vance said. Abacus was founded in 1984 by business leaders in New York's Chinese community, according to its website. It has branches in New York, New Jersey and Pennsylvania. Link this Share this Digg this Email Reprints

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