SEC fines First Mortgage $12.7M, bans 6 execs for defrauding Ginnie Mae investors

Claimed performing mortgages were delinquent, resold them into new pools

Several senior executives at First Mortgage Corporation lied about the performance of the mortgages the company originated so they could pull the mortgages out of mortgage-backed securities guaranteed by Ginnie Mae,then turn right back around and sell the mortgages back into new mortgage bonds, defrauding investors out of $7.5 million, the Securities and Exchange Commission said Tuesday.

According to the SEC, six senior executives at California-based First Mortgage, including the company’s chairman and CEO, president, and chief financial officer, pulled current, performing loans out of Ginnie Mae mortgage bonds by falsely claiming the mortgages were delinquent in order to sell them at a profit into newly-issued RMBS.

In a release, the SEC stated that from March 2011 to March 2015, First Mortgage and its senior-most executives “orchestrated a scheme” to make the mortgages appear delinquent, by delaying depositing customers’ payments on their mortgages, making it seem like the customers were behind on their payments.

Read on.

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