A jury ruled that New York-based Abacus Federal Savings Bank and two of its senior officers are not guilty of defrauding Fannie Mae, bringing some closure to a case that began in 2012 and a trial that began four months ago.
Just over two years ago, Manhattan District Attorney Cyrus Vance filed charges against Abacus Federal and 19 individuals associated with the bank, accusing the bank of selling fraudulent loans to Fannie Mae. The bank and its employees stood accused of inflating the income of loan applicants and falsifying documents.
According to a report from the New York Times, a New York jury found Abacus not guilty of charges including grand larceny, conspiracy, falsifying business records and residential mortgage fraud.
From the New York Times report:
Ten of the defendants pleaded guilty, and some of those agreed to testify for the prosecution against their superiors.
But the bank’s chief credit officer, Yiu Wah Wong, and Raymond Tam, who was the loan origination supervisor, went to trial in late January, along with the bank itself, as a corporate entity. Seven former employees still await trial.
Mr. Wong and Mr. Tam were found not guilty of all charges against them, including grand larceny, conspiracy, falsifying business records and mortgage fraud. They argued at trial that they were unaware of the fraudulent documents being created by loan originators, who earned commissions and had a financial incentive to burnish the borrower’s credentials.
According to the Times report, Abacus is a small bank that has a “major presence” among New York City’s Chinese population.
Again from the Times:
From the start, it was a difficult case for prosecutors to prove. Loan originators and borrowers testified they had colluded on loan after loan — evidence related to 32 mortgages was presented — to overstate the income and exaggerate the job titles of mortgage applicants. Yet few of the bank’s loans went into default. The bank’s default rate was 0.3 percent during the period covered by the indictment, from May 2005 to February 2010 — far below the national average.
