A New Jersey man has been sentenced to over eight years in prison for a 10-year mortgage fraud scheme. Lenders lost at least $47 million, while the total fraud was estimated at $60 million when securities fraud was included.
The U.S. Department of Justice reports Seth Levine, 53, of Teaneck, N.J., was sentenced to 97 months in prison on March 30 for orchestrating a long-running bank and securities fraud scheme, which led to large-scale losses for financial institutions and investors. He was sentenced for one count of conspiracy to commit bank fraud and one count of securities fraud.
According to the DOJ, from 2009 through August 2019, Levine directed a scheme to fraudulently refinance over 70 multifamily properties representing 2,500 apartments he controlled by providing “materially false information” to financial institutions about the rents collected, the number of apartments leased, the expenses, and the true owners of the properties.
Levine and others provided lenders with fake documents, including falsified leases that created the appearance that vacant spaces were occupied and that overstated the rent paid by tenants; fake personal financial statements; fake expense documents, and fake operating agreements that misrepresented ownership interests in the multifamily properties. Levine also forged signatures on some of the fraudulent documents submitted to lenders.
As a result of the fraudulent refinances, Levine received cash payouts from the lenders, which he and others used for their own enrichment and to continue the fraud scheme.
Levine's attorney told NorthJersey.com, "I think Seth Levine is really a wonderful man, despite his conviction," and "called it a 'fairly tough day' for his client."
At the time the fraud was discovered, the outstanding balance of the fraudulently obtained mortgages on the multifamily properties was more than $150 million, including 40 mortgages held by Freddie Mac with an outstanding loan balance of approximately $103 million. At the time of sentencing, the bank fraud conspiracy resulted in losses to victim lenders of at least $47 million, the DOJ said.
Many of the lenders who approved mortgages based on the false statements of Levine and others in turn sold those mortgages to Freddie Mac and Fannie Mae. Because the refinances were obtained with fraudulent data regarding the properties’ income and expenses, the multifamily properties were overvalued and rents and other income from the properties did not cover the mortgage payments and other expenses associated with the properties.
To cover the shortfalls, Levine obtained additional cash-out refinances, thereby increasing his total debt incurred. In total, Levine controlled at least 70 multifamily properties, comprising approximately 2,500 apartments.
At the same time he was ripping off mortgage lenders, Levine also carried out a securities fraud scheme to defraud investors in the multifamily properties. At the time of sentencing, the securities fraud victims lost more than $13 million.
