All 12 face conspiracy charges, with some facing additional counts, including grand larceny and mortgage fraud. Loan officers created fake letters saying borrowers had received money for their down payments in gifts.ĭuring the arraignment of the 12 former employees, some required the assistance of a translator and appeared stunned as they were led off to jail by court officers pending hearings on bail applications. On thousands of loans, prospective borrowers were instructed to inflate their incomes, assets and job titles to meet Fannie Mae’s requirements. Vance’s office said the fraud had infected every unit at Abacus, including its management. But he said the problems were too pervasive and the bank’s cooperation was “too little, too late” to warrant not prosecuting it. Vance said he had seriously contemplated the potential “collateral consequences” of indicting the bank itself. That trend has been a political hot point in the wake of the financial collapse, with many saying the companies and executives who profited from mortgage investment schemes were afforded undue leniency. Indicting a business can lead to its demise, a reason that many investigations into large corporations end with deferred prosecution agreements and fines. Sung’s statement, which did not point out specific inaccuracies, said that Abacus had itself reported problems within its lending division to regulators and added that its loan default rate remained well below national averages. There are so many distortions and inaccuracies in his indictment, it is shameful.” I am greatly disappointed in the district attorney’s actions. “As an immigrant who came to America more than 50 years ago, I have always believed in my country’s reputation for fairness and justice,” the statement said. The bank attracted the attention of investigators in 2003, when a bank manager was charged with taking more than $1 million from customers’ accounts panicked depositors then staged a Depression-style run on the bank, withdrawing more than $2 million. Its seven branches include two in Chinatown and others in Sunset Park, Brooklyn and Flushing, Queens. Twelve former Abacus employees were arraigned in State Supreme Court in Manhattan on Thursday seven others have pleaded guilty and are cooperating with the investigation.Ībacus was founded in 1984 by business leaders from the Chinese community to provide banking services to immigrants and residents of Lower Manhattan. “If we’ve learned anything from the recent mortgage crisis it’s that at some point, these schemes will unravel and taxpayers could be left holding the bag,” Mr. Vance said that the 2008 financial crisis showed the danger of waiting for illegitimate mortgages to go bad. Vance said that nearly all of the Abacus loans were still performing, meaning the borrowers were still making payments on the mortgages they received. In announcing the indictment on Thursday, Mr. Vance Jr., said his office had not obtained an indictment against a bank since its 1991 case against Bank of Credit and Commerce International. The Manhattan district attorney, Cyrus R. As those mortgages went bad, banks considered too big to fail were brought to their knees and bailed out by taxpayers.įrom May 2005 through February 2010, hundreds of millions of dollars’ worth of Abacus mortgages were guaranteed by the Federal National Mortgage Association, known as Fannie Mae, based upon false information, the indictment says. The indictment against the bank and its employees describes the sort of scheme that led to the financial crisis of 2008, when the risk of mortgages to borrowers was disguised and passed on to investors. Abacus Federal Savings Bank, a small bank with a major presence in New York City’s Chinese community, and 19 of its former employees have been charged with inflating the qualifications of mortgage applicants to meet federal loan standards, a scheme that prosecutors say brought the bank tens of millions of dollars in ill-gotten fees and sent hundreds of millions of dollars in risky mortgages to the investment market.
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