With hundreds of pages of paperwork and thousands of dollars on the line, getting a mortgage can be a complex and intimidating transaction for homebuyers, who often depend on experts to get them through the process.
Unfortunately for some mortgage applicants in Western Pennsylvania, dishonest real estate professionals took advantage of that trust with fraudulent practices.
As the real estate market boomed before the 2008 crash, Pittsburgh-based Century III Home Equity was a successful brokerage, closing an estimated $100 million in loans annually. As a broker, the company acted as a middleman between the mortgage applicant and the lender, but the company’s employees manipulated both sides to enrich themselves. The owner—James Nassida, IV—and his loan officers misleadingly sold customers mortgage products that were not always appropriate for their financial situation but racked up the most fees. The brokerage also fooled lenders by lying about applicants, doing things such as inflating income, misrepresenting home values, or not disclosing that down payments were actually borrowed money.
“There was massive fraud here. They were not looking out for their borrowers; they were looking out for themselves,” said Special Agent Neal Caldwell of the FBI’s Pittsburgh Division, who investigated the case with the U.S. Secret Service as part of the Western Pennsylvania Mortgage Fraud Task Force. The task force, which came together in 2008, looked holistically at the mortgage fraud threat throughout the Pittsburgh area as part of a multi-agency team involving the U.S. Attorney’s Office, FBI, IRS Criminal Investigations, U.S. Secret Service, U.S. Postal Inspection Service, and others, including state agencies. The task force’s work over a 10-year period led to 140 convictions, ranking the Western District of Pennsylvania as one of the most successful districts in the country in prosecuting mortgage fraud.
Nassida required his employees to do whatever it took to close a loan, even if it was dishonest or illegal. In many cases, the company would sell a borrower a loan with a temporary minimum payment option, designed for those with seasonal or fluctuating income, without fully disclosing the terms. In actuality, the temporary minimum payment didn’t even cover all of the interest each month, causing the loan to “negatively amortize,” or actually increase the balance of the loan. While some customers, such as house flippers, understood these products, others found them disastrous financially when they were not fully informed of the consequences of paying the lower amount over a longer period of time. This was especially difficult for borrowers once the housing market crashed in 2008—they could no longer rely on a consistent increase in their home values to keep them from going “underwater,” or owing more than their homes were worth.
