Real estate investment firm owners arrested for $17M fraud scheme

The former Chief Executive Officer and Chief Operating Officer of Cabot Investment Properties were arrested for allegedly participating in a scheme to defraud investors in numerous real estate investments by misappropriating over $17 million to pay for personal and business expenses and covering up their fraud with manipulated financial statements.



Carlton Cabot, 52, of Stamford, Connecticut, and Timothy Kroll, 44, of New Hope, Pennsylvania, are expected to be presented and arraigned before U.S. Magistrate Judge Henry Pitman.



According to the allegations contained in the criminal complaint unsealed in Manhattan federal court:



From 2003 through 2012, Cabot Investment Properties - which was controlled by Cabot and Kroll - sponsored and oversaw approximately 18 so-called tenants-in-common securities offerings to investors located all over the United States.  A TIC investment is a real estate investment in which investors collectively own a piece of commercial real estate and are entitled to receive a portion of the rental income from the property.

 

From 2008 through 2012, Cabot and Kroll engaged in a scheme to defraud the TIC Investors by misappropriating funds belonging to the TIC Investments and concealing their misappropriations by providing false and misleading financial reports and other information to the TIC Investors.

According to the representations in the offering prospectuses for the TIC Investments, CIP was only allowed to collect "excess" rental income from the TIC Investments - i.e., any additional money left over after the TIC Investments had paid the operating expenses for the properties and the disbursements due to the TIC Investors.  Despite these representations, Cabot and Kroll repeatedly transferred money out of bank accounts belonging to the TIC Investments and into CIP bank accounts that they controlled (the "CIP Operating Accounts") before the TIC Investments could use the funds to pay for operating expenses and disbursements to the TIC Investors. 

Cabot and Kroll then used these funds to pay for the following three unauthorized purposes, without the knowledge or authorization of the TIC Investors:

Cabot and Kroll caused millions of dollars to be transferred from the CIP Operating Accounts to the bank accounts of TIC Investments that had no available funds to cover their operating expenses and investor distributions.  In this way, Cabot and Kroll were able to perpetuate the fraud scheme by propping up failing TIC Investments using funds belonging to other TIC Investments.

 

Cabot and Kroll used the funds in the CIP Operating Accounts belonging to the TIC Investments to pay for millions of dollars of personal expenses, including expensive cars and rental apartments and private school tuitions.

 

Cabot and Kroll used the funds in the CIP Operating Accounts belonging to the TIC Investments to pay for CIP business expenses, including an approximately $1,125,651 civil settlement to certain TIC Investors who had sued Cabot, Kroll, CIP, and a CIP subsidiary.

To conceal their misappropriation of TIC Investment funds from the TIC Investors, Cabot and Kroll provided false and misleading financial reports to the TIC Investors that intentionally hid the fact that CIP owed large sums of money to the TIC Investments.  Kroll also gave false and misleading information to the TIC Investors about how the TIC Investment funds were managed in order to prevent the TIC Investors from learning the true financial status of their investment.

http://www.housingwire.com/articles/34103-real-estate-investment-firm-owners-arrested-for-17m-fraud-scheme

MUST-WATCH TRAILER: Hollywood realistically tackles foreclosure crisis with '99 Homes'

OK, so this is the official/unofficial launch for the official/unofficial Jacob Gaffney campaign to make 99 Homes the biggest blockbuster movie this year.



  From Slate:





Set in Florida in the aftermath of the 2008 subprime mortgage crisis, the suspenseful drama stars Michael Shannon as real-estate shark Rick Carver and Andrew Garfield as the man that Carver kicks out of his home and then tries to make his apprentice.





Yes. This is a real movie that is definitely happening.



It opens Sept. 25 and, apparently, it was a big hit on the festival circuit. 



So how closely does Hollywood mimic life?



Does the trailer below sensationalize the eviction process? Pretty much.



Does the trailer below fairly portray the eviction process during foreclosures? Well, pretty much.





Most people I speak to are more sensitive to the former homeowners, much more sensitive, but let's face it: there are plenty of rogue elements out there.



But as Shannon states in the movie, rather matter-of-factly: "I didn't kick you out, the bank did."



If this trailer is anything to go by, this movie will be well worth watching for everyone in the housing and mortgage finance space.



Slate.com is even saying that actor Michael Shannon is gaining "Oscar buzz" in his portrayal of a real estate version of Gordon Gekko.



And it's a film about how to recruit top talent into your mortgage business.



Take when Shannon motivates others by declaring: "Only one in 100 are gonna get on that ark, son. Every other poor soul is going to drown."



Yup, they don't call it distressed real estate for nothing.



But, seriously, let's go see this thing; we owe it to life.



Take a look and tell me what you think.

http://www.housingwire.com/blogs/1-rewired/post/34085-must-watch-trailer-hollywood-realistically-tackles-foreclosure-crisis-with-99-homes

Officials break ground on new office, lab space in east Baltimore

The foundation for a new office and laboratory complex is taking shape in East Baltimore near Johns Hopkins Hospital -- a project expected to bring jobs and create needed space for fledgling biotech companies.

Although crews have already begun work on the foundation for 1812 Ashland, where a crane lowered supplies to workers in hard hats and neon vests Friday, just beyond a chain link fence local leaders held a ceremonial groundbreaking for the $65.6 million facility.



The 165,000-square-foot building, located at 1812 Ashland Ave., will provide space for life sciences companies and entrepreneurial firms once it is completed. The target date is July 2016.

Tenants have already committed to occupy about 70 percent of the building, including spinoff ventures from the nearby Johns Hopkins campus, according to Forest City-New East Baltimore Partnership, which is developing the seven-story structure and will own and manage it.



One tenant will be FastForward East, a Hopkins-affiliated commercial incubator. In addition to labs and office space, officials said, the building will include 2,000 square feet of retail space to serve workers and residents in the Middle East neighborhood.

"Just to see it in reality ... it is truly awe-inspiring," Mayor Stephanie Rawlings-Blake said at the groundbreaking.

The project will not only help reach her goal of growing the city by 10,000 families, the mayor said, it will offer economic opportunity for current residents and reasons for them to remain in Baltimore. She said the project will build on the city's existing reputation for attracting tech startups.

Ronald J. Daniels, president of the Johns Hopkins University, said the project will bring and create jobs, which is key to the area's continuing redevelopment. The area around the hospital is being redeveloped under the auspices of the public-private East Baltimore Development Inc.

Daniels noted that recent unrest in the city has spurred debate about the success of revitalization efforts elsewhere, but he said that unlike other efforts, the 1812 Ashland building will help promote jobs in the EBDI area.

"It's not enough just to rebuild homes," he said, or schools. "The cornerstone of a healthy community has to be jobs."



1812 Ashland is the third of seven life sciences buildings planned for the area, along with a central park and housing.

Among those in the crowd at Friday's groundbreaking was Wendy Y. Yap of CDI Laboratories, who said the new space would be a good opportunity for the growing company, which is studying the use of proteins in health care. It currently leases space across the street at the Rangos Building, which houses other research labs and offices.

"We're getting to the point where we want to grow further," she said.

jkanderson@baltsun.com

twitter.com/janders5

Copyright © 2015, The Baltimore Sun

http://www.baltimoresun.com/business/real-estate/bs-md-ashland-groundbreaking-20150515-story.html?track=rss

HUD selects Richard Green as senior advisor for housing finance

The U.S. Department of Housing and Urban Development appears to have found a replacement for former HUD Senior Advisor Edward Golding, who recently took over as head of the Federal Housing Administration.



Richard Green, who currently serves as the director of the University of Southern California Lusk Center for Real Estate, will take over for Golding as HUD senior advisor on July 1.



"After dedicating my career to the study of housing economics and providing research and information intended to guide our country's housing policy, it's an honor to be invited to the front lines of our nation's effort to provide safe, affordable housing to all," Green said in a release provided by the Lusk Center.

Golding, a former Freddie Mac executive, took over as the leader of HUD from acting commissioner Biniam Gebre.

Green, who served as principal economist and director of financial strategy and policy analysis at Freddie Mac earlier in his career, will serve a one-year term in the role of senior advisor.

In his role at HUD, Green will advise on HUD's top strategic objectives, including the creation of a sustainable housing system that provides support during market disruptions.

Green will also work with HUD's Office of Policy Development and Research, where he will help set the agenda for housing finance research and play a key role in a range of housing finance projects.

Additionally, Green will help guide HUD's ongoing efforts to ensure continued access to homeownership and multifamily investment opportunities for creditworthy borrowers while avoiding the problem of private gains and public losses, the Lusk Center said in a release.

Green will also take part in the work of HUD's Office of Policy Development and Research with the FHA on issues that involve both offices and participate in cross agency housing groups, such as the weekly housing deputies meetings at the White House and the rental housing policy working group.

According to Green's bio, prior to joining the USC faculty, he spent four years as the Oliver T. Carr, Jr., Chair of Real Estate Finance at The George Washington University School of Business. Green was also director of the Center for Washington Area Studies and the Center for Real Estate and Urban Studies at George Washington.



Green also taught real estate finance and economics courses for 12 years at the University of Wisconsin-Madison, where he was Wangard Faculty Scholar and Chair of Real Estate and Urban Land Economics.

More recently, Green was a visiting professor of real estate at the University of Pennsylvania's Wharton School.

Raphael Bostic, who is the director of the USC Bedrosian Center on Governance and a former assistant HUD secretary, will serve as interim director of the USC Lusk Center while Green serves in his post at HUD.

Bostic was also recently elected to the board of governors of Freddie Mac. Bostic, 48, served as assistant secretary for policy development and research at HUD from 2009 to 2012. In this position, Bostic was a principal advisor to the Secretary of HUD on policy and research.

Bostic, who was previously the Lusk Center's interim director prior to joining HUD for the first three years of the Obama administration, will direct both centers until Green returns to USC after June 2016.

http://www.housingwire.com/articles/34057-hud-selects-richard-green-as-senior-advisor-for-housing-finance

Hot Seat: Jason Hogg of B2R Finance

With homeownership rates at their lowest levels in 20 years, renting continues to grow in popularity. But investors looking to seize the opportunity and expand their rental footprint face a complicated mortgage process that hinders easy scaling. Especially for smaller investors, it can be tough sledding. HousingWire sat down with B2R CEO Jason Hogg to find out how his company is making that process easier and more transparent for investors of any size.

HousingWire: For all kinds of reasons, the popularity of renting has just taken off. What kind of unique challenges do residential rental investors face?

Jason Hogg: Over time, the mortgage lending industry has evolved to primarily serve the owner-occupied buyer and the commercial buyer. The industry also remains mired in paperwork, forcing buyers to endure a cumbersome, frustrating process every time they want to apply for and secure financing.

Today, technology remains woefully absent from the process. The lenders serving owner-occupied and commercial buyers try to twist their products to fit the financing needs of the single-family rental investor, but continue to come up short.

The needs of the SFR investor often don't align with the narrow box offered by traditional lenders and that's where we come in.

HW: How do B2R and Dwell Finance try to meet those kinds of  challenges? Does size matter when you're developing these products?

JH: At B2R and Dwell Finance, we've taken a clean-sheet approach toward developing products and technology that meet SFR investors' cash flow, proceeds and structuring needs. This enables us to offer a full suite of business lending solutions.

Dwell Finance offers products that are designed for smaller professional investors who renovate and resell properties, need bridge-to-term financing or want to unlock equity to continue to invest. At the other end of the spectrum, B2R serves larger institutional investors and offers tailored solutions that can help them more effectively leverage existing portfolios.

Our products are designed to sustain each stage of portfolio growth and we aim to create long-term partnerships. Our goal is to support our customers from the purchase of their first rental property all the way through to their 50th and beyond.

Underpinning all of our products is the Dwell Finance platform, which looks to create a better, customer-focused experience by automating the application process and providing tools and resources that help investors get more out of their rental portfolios.

HW: How does B2R's recent acquisition of assets from Dwell Finance benefit your clients, particularly when it comes to technology?

JH: We are incredibly excited to add Dwell Finance to the B2R family. The acquisition of the Dwell Finance business has allowed us to open regional offices, expand our suite of lending products and build the first SFR financial technology platform vertically integrated from origination through securitization.

We know that the lending industry is wildly behind when it comes to meeting customer demand for technology and we are changing that.

Through the Dwell Finance platform, we can automate the application and decisioning process and manage the customer lifecycle in a way that is low-friction for the borrower and offers transparency around where they are in the process and how to work together.

The platform will continue to make it easier and faster for our customers to access the resources they need to continue to grow their businesses.

HW: What kind of products do B2R and Dwell Finance offer for buy-to-rent investors?

JH: Our focus has been to offer a full suite of business lending solutions that meet our customers' needs throughout their business lifecycle.



Starting with our smaller customers, Dwell Finance provides short-term and bridge products that allow them to grow their businesses and then graduate to our term portfolio products.

In addition, B2R offers tailored lending solutions designed to help effectively leverage existing portfolios, completing the product spectrum from the small professional investor to the large-scale institutional investor.

http://www.housingwire.com/articles/34015-hot-seat-jason-hogg-of-b2r-finance

Quicken Loans wins first round in court battle versus DOJ, HUD

Quicken Loans secured the first victory in its battle against the U.S. Department of Justice and the Department of Housing and Urban Development when a federal judge ruled that Quicken's lawsuit against the government will be heard before the government's case against Quicken is heard in a separate court.

In mid-April, Quicken sued the DOJ and HUD in Federal Court in Michigan, saying that it was left with no alternative but to take legal action after the DOJ demanded Quicken Loans make "blatantly false" admissions about its lending practices, as well as pay an massive penalty or face legal action.

Then, several days later, the government countersued Quicken in Federal Court in Washington D.C., saying that the lender "knowingly submitted, or caused the submission of, claims for hundreds of improperly underwritten loans" insured by the Federal Housing Administration from September 2007 through December 2011.

According to a report from MLive, U.S. District Judge Reggie Walton in Washington handed down a ruling Friday, granting a motion from Quicken, which will allow Quicken's suit against the DOJ and HUD to be heard first.

The MLive report states that Walton will not hear the DOJ's suit against Quicken until U.S. District Judge Mark Goldsmith in Detroit decides whether to move forward with Quicken's case against the DOJ.



From the MLive report:

Jay Farner, Quicken Loans President and CMO, told MLive on Friday that it had been "a good day in court for us."

The MLive report states that the two sides are arguing over where both cases will be heard, with Quicken pushing for the cases to heard in its native Detroit and the DOJ pushing for the cases to be heard in Washington.

According to a separate report from The Detroit News, Walton told the parties that he is "leaning" towards moving both cases to Michigan.

"Aren't all the documents and witnesses there, and the loans granted from a location in that district?" Walton said, according to the Detroit News report. "If that's true, I'd be inclined to transfer."

According to the DOJ, Quicken was a direct endorsement lender with the FHA, which gave Quicken the authority to originate, underwrite and certify mortgages for FHA insurance.

In its suit, the DOJ alleges that Quicken did not adhere to the FHA's underwriting standards.

The government's complaint alleges that Quicken instituted and encouraged an underwriting process that led to employees disregarding FHA rules and falsely certifying compliance with underwriting requirements in order to reap the profits from FHA-insured mortgages.

"The complaint further alleges that Quicken failed to implement an adequate quality control program to identify deficient loans, and that Quicken failed to report to HUD the loans it did identify," the DOJ said in its suit. "In particular, according to the government's complaint, despite its obligation to report to HUD all materially deficient loans, during the period from September 2007 to December 2011, Quicken concealed its deficient underwriting practices and failed to report a single underwriting deficiency to the agency."

When Quicken filed its suit against the DOJ, the lender's CEO, Bill Emerson, said that the company was left with no other choice.

"After three years of struggling to understand the DOJ's position and methodology that would warrant the country's largest and highest quality FHA lender to make untrue admissions and pay an inexplicable penalty or face public legal action, it is time to ask the court to intervene," Emerson said at the time. 

"No threat, including high-profile senseless lawsuits from powerful federal officials, will deter our company and its leadership from doing the right thing," Emerson continued. "We will stand in defense of our impeccable reputation established by thousands of hard-working ethical team members over our 30-year history."

http://www.housingwire.com/articles/34042-quicken-loans-wins-first-round-in-court-battle-versus-doj-hud

Aspen Grove Solutions promotes Ron Briggs to senior vice president

Aspen Grove Solutions, a provider of property related technology solutions for REO, short sale, asset management, inspections, property preservation, vendor management and compliance, annouced the promotion of Ron Briggs to the postion of senior vice president of business development.

In this role, Briggs will lead the business development team and is tasked with supporting clients and ensuring that Aspen Grove delivers timely and cost-effective solutions to customers, the company said in a release.

Briggs joined Aspen Grove earlier this year, bringing 25 years of experience from the real estate industry, specifically the mortgage servicing and default space.

"Ron has been a great asset since he joined, his rapid promotion within the company is a reflection on his unquestionable ability and shared values," said Ed Buckley, President of Aspen Grove Solutions.



"We are ready to continue with the success of Aspen Grove Solutions and further deepen relationships with our clients by understanding, predicting and reacting to their needs better than anyone else." 

http://www.housingwire.com/articles/34037-aspen-grove-solutions-promotes-ron-briggs-to-senior-vice-president