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Long Island lender accused of fraud
[November 19, 2007]

Long Island lender accused of fraud

(Newsday (Melville, NY) (KRT) Via Thomson Dialog NewsEdge) Nov. 18--By all appearances, Aaron Wider is the chief executive of a flourishing mortgage bank in Garden City, issuing more than $33 million in home loans to buyers across Nassau and Suffolk counties over the past four years.

A closer look at his lending practices, however, reveals that many of these loans relied on faulty appraisals and exaggerated loan applications, leaving behind angry homeowners who are struggling to pay mortgages on overpriced homes.

"I trusted him, I felt like he was an honest person," said Robin Fitzgerald, who negotiated with Wider to pay $805,000 for a home in North Massapequa in 2005 that a later appraisal valued at $545,000. Fitzgerald is now facing foreclosure. "I wasn't familiar with the prices of houses here. I'm a first-time homeowner."


Along with a handful of associates, Wider bought and sold houses and issued mortgages for at least 30 properties, pushing the prices of some homes to as much as $300,000 above similar sales in the area, a Newsday investigation has found. Most of the time, the houses were sold twice on the same day.

One of his bank's biggest borrowers was Wider himself, who received $10.8 million in home loans. Banks have begun foreclosure proceedings against the owners of at least 12 of these homes, exacerbating an already rising foreclosure rate in East Massapequa, the community where most of Wider's activity has been concentrated.

Wider's bank, HTFC Corp., is being sued in federal court by two large banks it sold millions of dollars in loans to -- Pennsylvania-based GMAC Bank and a subsidiary, Minnesota-based Residential Funding Company -- which charge in court records that the loans were fraudulent.

If the allegations are true, it suggests that Wider and his associates turned a profit on the real-estate deals by selling homes at inflated prices; issuing loans to cover those higher prices; and selling off the loans to other banks, thereby eliminating his responsibility for the loans if the borrowers stopped paying their mortgage. The two banks are seeking $19 million in damages.

In June, Nassau County Assessor Harvey Levinson's office forwarded details of several of Wider's sales to the Nassau district attorney's office, which declined to comment.

Wider's activities are coming to light in a time when foreclosures are mounting locally and nationally, focusing attention on lending practices that flourished during the housing boom. Throughout the last decade, as housing prices rose rapidly, mortgage companies loosened the rules that required buyers to document their income and make substantial down payments on houses. During this period, the companies earned money by selling mortgages to buyers such as GMAC, which assumed the risk that the homebuyer wouldn't be able to pay the hefty mortgage.

The story of Wider's real-estate transactions is told in voluminous court records, deeds, mortgages, appraisals, loan applications and other documents examined by Newsday during the past two months, as well as interviews with people involved in the transactions.

Wider was interviewed for this story, answering several questions before refusing to go further. He said his practices are legal and proper. When he declined requests for additional interviews, a Newsday reporter submitted written questions to him, which he also declined to answer. Two of Wider's associates whose names appear on documents related to some of these sales also either could not be reached or declined to comment. In the interviews, Wider said he has the right to buy and sell homes at any price he wants.

"These are houses that were bought in distress," Wider said, adding that he later renovated them. "Since I lend my own money, I can sell the property any price that I want."

One example of Wider's actions is the Fitzgerald house at 1004 North Broadway -- an ordinary high ranch in the middle-class neighborhood of North Massapequa, with a stone facade and a view of a busy street. On a single day in April 2005, the house inexplicably skyrocketed in value.

First, Wider bought it for $475,000, Nassau County property records show. Then he transferred the property to a real estate trust, with a trustee who was Wider's personal lawyer.

The same day, the trust sold the house to a one-time account executive at Wider's bank for $750,000. At the same time, HTFC issued the account executive two loans totalling $700,000.

In less than 24 hours, the price tag of the home went from $475,000 to $750,000 -- at a time when similar homes in the neighborhood were selling for just more than $500,000. HTFC later sold these loans to another bank.

Experts interviewed by Newsday say Wider's practices have all the hallmarks of what are called flipping schemes, which consist of turning a quick profit on a home by selling it to a buyer, then convincing a bank to issue a mortgage. Often the second sale is on the same day and is for a price that far exceeds what the house is really worth. Unless fraud is involved, experts describe these practices as legal.

In Wider's case, records show, he frequently bought properties and transferred them to private trusts before they were sold to known associates, such as his lawyer or others once listed on the HTFC Web site as bank employees. Newsday's examination of the records show Wider sometimes used inaccurate appraisals and documents that falsely stated an applicant's financial situation as the underpinning of a loan.

Wider's bank then often sold the loan to another bank. Once the deal was complete, Wider renovated the homes and he or his associates sold the homes to new buyers at similarly high prices.

While not commenting on Wider's practices, experts say illicit flipping schemes are believed to be rampant in hot real-estate markets, and evade notice because of rising property values and a high volume of sales. But now, with home sales on Long Island slowing dramatically and prices falling slightly, these practices are harder to conceal.

"Rising real estate just kind of covered up all of this activity that's been going on for quite a time," said Alyssa Katz, a spokeswoman for Brooklyn's Pratt Institute for Community Development, who is also researching mortgage fraud issues for a planned book. "When the money stopped is when the music stopped."

A Newsday investigation into Wider's real estate dealings has found that:

Appraisals used to justify the loans on at least two of Wider's properties examined by Newsday are riddled with errors. In some examples, the reports failed to note a pool and finished basements on high-priced "comparable" sales -- attributes that would have flagged the homes as superior to the ones being valued. In one case, a "comparable" home didn't even exist at the address listed in Massapequa Park and instead was found in Old Bethpage, several miles away. One appraiser told Newsday that he has never met Wider and did not write the appraisals; the pending federal lawsuit against HTFC filed by Residential Funding repeats the allegation.

Loan documents for two borrowers also contained inaccurate information, interviews show. In one case, a man was said to have a 13 and 14-year-old child when he had only one adult daughter. In another, the borrowers' credit scores were listed as higher than the borrowers say they actually were. Both borrowers, who nevertheless signed the documents, said in interviews that Wider filled out the forms himself.

Lawsuits have followed Wider since he began investing in real estate at least five years ago. According to one federal suit that was settled in 2005, Wider's bank issued loans in the name of four dead people in the Chicago area, then sold those loans to another bank. Wider's ex-wife has sued him. In a Nassau County case that also was settled, she said he talked her into using her credit to buy several homes in the Bronx and Cleveland then never paid the mortgages as he promised.

In each of the homes that Wider or his associates purchased, the homes were bought at prices similar to other sales in the area -- usually at less than $500,000 -- then transferred into a trust, according to county property records. Finally, a trustee sold the home to another associate on the same day for a much higher price -- often ranging from $750,000 to $850,000.

The same names show up time and again in county property records, although the role they play varies from transaction to transaction. For example, Wider's lawyer, John Petiton of Garden City, often signed as a trustee, but he acted as a buyer and a seller in other deals.

Employees of HTFC Corp. also participated, including John Hatalovsky Jr., who acted as a buyer in at least two transactions and who, according to the HTFC Corp. Web site, was once an account executive there. Joseph M. Ferrara Jr., who renovated Wider's homes according to a former co-worker, John Barbaro, served as a buyer or seller at least four times.

In the brief interview, Wider said Hatalovsky was not technically an HTFC employee. Hatalovsky declined to comment, except to say that he does not know Aaron Wider. Ferrara would not answer questions about his involvement in the transactions.

Petiton said he could not comment about specifics because of pending litigation. "As a purchaser of real estate, all I'm concerned about is that I get a clean and marketable title," Petiton said. He added, "I'm a man of free will. I buy what I want and I don't buy what I don't want."

Sometimes even the notary public who signed Wider's real estate documents participated in the deals. Teresa Marotta, who notarized deeds and mortgages in many Wider deals, signed her name as a party to at least two sales.

In one case, she notarized a form for a sale involving a development company. On a related form, Marotta had signed as a secretary of the firm. Eamon Moynihan, a spokesman for New York's Department of State, which oversees public notaries, said a notary can not have an interest in a sale she also notarizes.

"I was told I didn't do anything wrong," Marotta said, adding that the attorneys present told her it was OK. She said she did not get paid beyond her usual fee and she did it "only because I was asked."

People who sold their homes to Wider or his associates expressed surprise at the prices their homes later sold for.

Mary Jackson sold her high ranch in East Massapequa to Ferrara for $485,000 in October 2005. The same day, records show, Ferrara transferred it to a trust and the trust sold it back to him for $800,000. "All I know is I sold my house, I went to closing and that was it. I don't think the house was worth that much more," she said.

Real-estate agents and appraisers who are familiar with the area agree that these prices are high.

"There's no way. It can't happen," said John Ford, manager of the Century 21 Prevete Bastone Agency in Massapequa. He said high ranches in East Massapequa are currently selling at just under $500,000 and property values could not have fallen that far in a few years. "Even two years ago, prices haven't come down from $800,000 to $400,000."

The role of Wider's bank appears critical to his overall practice. The records show that HTFC often issued loans to the buyers on the same day that the properties changed hands. He and his associates have received millions of dollars in home loans from HTFC during the past four years. The bank loaned Ferrara a total of $6.9 million in home mortgages, according to data provided by the Nassau County assessor's office. Petiton borrowed $4.8 million. HTFC's biggest private borrower in Nassau County was Wider himself, the records show.

Many of these loans were quickly sold to other banks. In the interview, Wider said HTFC did not sell these loans. Instead, he said he retained the other banks to do the servicing on the loans. In nearly half the cases, county property records and court documents show otherwise.

Jacqueline McCormack, a spokeswoman for the New York State Banking Department, said banks are not prohibited from issuing personal loans to their chief executives, nor are they barred from loaning money to buyers or sellers when the chief executive is involved in the transaction.

However, because Wider was a mortgage banker, he may have avoided some of the checks normally in place in good lending practices, said Rachel Dollar, an attorney in Santa Rosa, Calif., who represents lenders in cases involving questions of mortgage fraud.

"All the controls are eliminated," she said. "The banker generally underwrites the loan, they are responsible, and they do the crosschecks on the appraisal." When a bank buys a loan from another bank, "they assume the underwriting has been done properly," she said.

GMAC and Residential Funding state in court papers that HTFC breached its contract by using "grossly overstated" appraisals and inaccurate loan applications to support the loans it sold. According to court documents filed in Minnesota, Residential Funding Company said that Wider also did not reveal his personal relationship with some of the borrowers, including with his lawyer, who is only identified in the court papers by the initials "JP." Attorneys for GMAC, which filed its suit in Pennsylvania, and Residential Funding Company did not comment. Both cases are in the discovery phase.

A Newsday review of four appraisals for two Wider properties shows that they are replete with errors.

In nearly every case, the appraisals described the homes as being less than a mile from the "comparable sales" used to value the home, when in fact the homes were often farther away, according to a review of the records. For example, an appraisal for the home at 1004 North Broadway used sales from homes in more upscale Massapequa Park that were as much as three miles away.

Dollar said it is not uncommon for investors to rely on the proximity of two neighborhoods to inflate values. "A lot of fraud areas are areas of lower valued homes that are a located right next to higher valued homes," she said.

The documents show that the appraisals did not list significant amenities that the comparables had, such as finished basements, and understated the homes' square footage -- making the homes look less attractive and closer to the description of the home being valued.

Other appraisals used comparables that were other Wider properties, but did not list the homes' multiple previous sales -- which could have drawn attention to the properties' inflated values.

"There's a lot of data in that appraisal that was done in such a way to support the value that they were coming in with," said Ken Rossman, a Wantagh appraiser who began noticing the high values on Wider homes a few years ago and reviewed the appraisal at 1004 North Broadway at Newsday's request. "It bore no relationship to the market."

Rossman and other appraisers said that the prices charged for the Wider appraisals -- $850 and $1,000 -- were more than double the going rate for a report on such homes.

"I would say that's excessively high," said Dominick Pompeo, a Manhattan appraiser who sits on the New York State Appraisal Board, which regulates appraisers.

An appraiser named Joseph Mirando, whose name is on two of the appraisals examined by Newsday, could not be reached for comment. Two business phone numbers in Centereach and Port Jefferson Station and two home phone numbers listed in his name in Centereach have been disconnected.

Another appraiser, Randall Jonason of Mount Sinai, said in an interview he has never worked with Aaron Wider and did not write the two appraisals on which his name is listed. He said he has hired a lawyer, was deposed in the GMAC lawsuit and said Mirando was one of his teachers at the Appraisal Education Network School in Bohemia. Asked about Jonason's name on the appraisal, Wider declined to comment.

In 2004, records show, the New York Department of State fined Jonason $750 for attaching the wrong picture to an appraisal and for saying he had inspected the interior of a property when he had not. Jonason said the fine was unrelated to this case and involved an employee who no longer works for him. In 2005, Mirando was fined $1,000 for failure to complete a continuing education course for appraisers.

The two homeowners who provided appraisals to Newsday have since had the homes reappraised. The home at 1004 North Broadway was found to be worth $545,000 as of the date it was purchased -- not $805,000 and $825,000, as the other appraisals had found.

A new appraisal of a home at 11 Quail Run in East Massapequa found it is now valued at $484,000 -- down considerably from the $830,000 and $825,000 estimates from 2005. Records show that the Fitzgerald house was purchased for $805,000, and the home at 11 Quail Run was bought for $812,500.

In addition to the appraisals, information on other real-estate documents pertaining to Wider homes examined by Newsday appears to be incorrect.

George Cornielle bought 11 Quail Run from the notary Teresa Marotta on behalf of a real-estate trust in 2005. He has a grown daughter and said he makes about $4,300 a month as a catering supervisor at Kennedy Airport. But a loan application signed by both Cornielle and Wider on Oct. 26, 2005, says that Cornielle has two children, ages 13 and 14, and earns $14,500 a month.

Cornielle said he was unaware of the errors on the loan application until a Newsday reporter showed him the documents. He conceded that he signed them. While it's unclear exactly why the data may have been changed, mortgage experts said having two minor children as dependents enables an applicant to report a higher take-home pay because of lower incomes taxes.

According to a "consumer credit score disclosure" form for the house at 1004 North Broadway, borrower Robin Fitzgerald is listed as having a higher credit score than she told Newsday she had at the time.

Both Cornielle and Fitzgerald said that Wider had filled out much of the documents before either arrived at the closing. Wider did not comment.

The Residential Funding Company lawsuit also makes accusations of other errors. In one loan file referred to in the suit, a borrower's income is listed as $100,000 a month, when according to the suit, the amount was actually about $12,000.

Although Wider's lawyer did not comment for this story, a counter-claim filed by Wider alleges that GMAC forced the properties into foreclosure by sending mortgage bills after the due dates. Wider also claimed that the mortgages in foreclosure had actually been paid in full. In the counter-claim, Wider said that he had reported GMAC's actions to several state attorneys general.

Lawsuits have followed Wider since he began investing in real estate around 2001. In 2003, Wider, HTFC and others were sued by Guaranty Residential Lending, a bank which had bought loans from Wider in the Chicago area. According to court papers filed in federal court in Illinois, Wider's bank issued home loans in the names of four people who were dead, then sold those loans to Guaranty. The loans also were supported by faulty appraisals and other documents, according to the suit, which settled in 2005, the terms of which could not be learned.

Wider also was sued by his ex-wife, Milkeya Carlot, who accused him of talking her into letting Wider use her home as collateral to fund his mortgage bank. She said he convinced her to invest in several homes in the Bronx and Cleveland.

According to her Nassau County suit, which also was settled, Wider promised to make the mortgage payments and share profits of any resales with her, but he never did. Several of the properties went into foreclosure, ruining Carlot's credit, she said in an interview and in court papers.

In the interview, Wider said he still does business with Guaranty Residential Lending, and said that he essentially won in court against Carlot. "She couldn't prove anything," he said.

Even as the real estate market has slowed, Wider has continued to buy and sell homes. According to Nassau county property records, a home in East Massapequa sold in August for $425,000. It then was transferred to a trust, and sold back to the original buyer for $750,000 -- all in the same day.

Both times the buyer was Aaron Wider. HTFC handled the loan.

Staff writer Tom McGinty contributed to this story.

1004 N. BROADWAY

Aaron Wider

PAID: $475,000

The Fitzgeralds

PAID: $805,000

On an April 2005 day, Wider bought the property then transferred it to a real estate trust. On the same day, the trust sold the house to a one-time account executive at Wider's bank for $750,000.

The mortgage banker: Aaron Wider

The chief executive of a Garden City mortgage bank, Wider is accused of making loans that relied on faulty appraisals and exaggerated loan applications. Wider said his lending practices are legal.

Loans and lenders

THE BANKER

Mortgage banker Aaron Wider and several associates bought and sold more than 30 homes in Nassau and Suffolk, in a series of same-day transactions that nearly doubled the price of many homes.

THE BANK

Wider's mortgage bank, HTFC Corp., issued mortgages on these homes, then sold many of the loans to other banks. Now two of those banks are suing Wider, alleging that the loans relied on "grossly overstated" appraisals and inaccurate loan applications.

THE BUYERS

Homeowners say Wider sold them houses they later learned were overpriced, and his bank issued mortgages they could not afford.

THE RESULTS

Twelve of those homes have since gone into foreclosure, exacerbating the troubles facing East Massapequa, a community with a rising foreclosure rate where most of Wider's activity was concentrated.

Buying tips

Know the area. Before you agree to buy a home, make sure you know what similar homes are going for in the area. Check local real estate listings and property Web sites. Hire your own appraiser if you want to be sure you know what the house is valued.

Hire your own lawyer. Be wary if the seller or banker offers to provide one for you.

Ask questions. At the closing, don't be afraid to take your time. Make sure you understand everything you're signing.

Read the documents. Don't sign forms that contain incorrect personal information. If the form is not entirely filled out, don't sign it.

Get copies. Ask for copies of all documents you've signed before you leave. Don't agree to have the copies mailed to you. Ask for copies of all appraisals. As a buyer, you have a right to a copy of the appraisal.

Some useful Web sites:

Long Island Board of Realtors (mlsli.com): The site is searchable by community, school district, price and other variables.

Property Shark

(propertyshark.com):

Contains detailed information about recent home sales, comparable sales, foreclosures and other data.

My Nassau Property (nassaucountyny.gov/

mynassauproperty): Run by the Nassau County Assessor's Office, the site is searchable by address and tax map numbers and contains photos, maps, property details, recent sales, comparable sales and assessment information.

Phone numbers

If you believe you are a victim of mortgage fraud or other real-estate crime, call:

FBI, 212-384-5000; Nassau County Economic Crimes Bureau: 516-571-2149; Suffolk County Economic Crimes Bureau: 631-853-5602

Questionable deals

The 36 parcels associated with Aaron Wider and HTFC Corporation that Newsday examined. At least 12 of these homes are in the early stages of foreclosure.

Farmingdale

Dix Hills

Deer Park

North Massapequa

East Massapequa

Massapequa Park

Seaford

Roosevelt

Merrick

Freeport

SOURCE: ESRI;TELEATLAS

How one ordinary home ahot up in price

Example of a home that Aaron Wider and his associates bought, sold and borrowed money on.

1

APRIL 29, 2005

Aaron Wider buys the home for $475,000.

Wider Transfers the property to a trust.

Wider's lawyer, John petition, sells the house on behalf of the trust to John Hatalovsky, Jr., a former Wider employee, for $750,000.

Wider's bank, HTFC Corp., issues two loans to Hatalovsky totaling $700,000.

Address: 1004 North Nroadway North Massapequa

Wider purchase price -- $475,000

Wider trust selling price to Hatalovsky -- $750,000

2

DEC. 6, 2005

Hatalovsky transfers the property to another trust

3

DEC. 29, 2005 -- MARCH 22, 2007

Dec. 29: Petition sells the house on behalf of that trust to Robin and William Fitzgerald for $805,000.

Jan. 4, 2006: HTFC issues two loans to the Fitzgeralds totaling $774,000. HTFC sells the Fitzgeralds' loans to another bank.

March 22, 2007: GMAC Bank, which now owns the Fitzgeralds' loans, begins the foreclosure process on their hom.

Hatalovsky trust selling price to Fitzgeralds -- $805,000

4

JULY 5, 2007

The angry Fitzgeralds hire an appraiser to value their home. According to the appraiser, it was worth $545,000 as of November 2005.

Fitzgerald appraised value -- $545,000

RESEARCHED BY KATIE THOMAS: NEWSDAY / ROD EYER

Stretching the truth?

Among the questionable appraisals used to evaluate the Wdier-affiliated 11 QUAIL RUN IN EAST MASSAPEQUA was an $840,000 home in upscale Massapequa Park. at the time of the appraisal, the Quail Run home was valued at $800,000 and was nearly 2,000 square feet with a full, finished basement.

COMPARED PROPERTY: 50 RAINBOW RD., MASSAPEQUA PARK

Appraiser: Jonason Appraisal*

APPRAISAL ACTUAL DATA

Selling price $810,000 $810,000

Distance from 11 Quail Run 0.72 miles 1.34 miles

(Twice the actual distance from subject property in a more upscale neighborhood. Should disqualify it as a comp.

Size 0.23 acres 0.28 acres

Age 46 years 46 years

Square footage 1,700 2,090

(Reporting home as smaller than actual size makes it appear to be a fair comp.

Basement Partial unfinished Partial, unfinished

Garage 2-car 2-car

Prior recent sale None March 17, 2004 ($550,000) (Not reporting recent sale makes asking price more believable to buyers.

*Appraiser Randall Jonason says he did not write the appraisal that was submitted under his name.

THE SERIES

NOV. 11

How rising foreclosures and high-cost loans may impact LI

NOV. 12

Businesses and merchants feeling the effect of the mortgage crisis

TODAY

How some LI families' home-owning dreams turned into nightmares

NEXT SUNDAY

How the country got into the mortgage mess -- and how it can fix the problem

DEC. 2

Advice for various categories of homeowners on how to cope

To see more of Newsday, or to subscribe to the newspaper, go to http://www.newsday.com

Copyright (c) 2007, Newsday, Melville, N.Y.
Distributed by McClatchy-Tribune Information Services.
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