Melville-Based Mortgage Lender to Pay $1.25M in Civil Fraud Settlement

Melville-based mortgage lender Franklin First Financial, Ltd. and three employees agreed to pay $1,250,000 in a civil fraud suit that was settled Tuesday, the U.S. Attorney for the Easter District of New York reports.

According to officials, Franklin First, chief executive officer Frederick Assini, chief operating officer Christopher Bertman and company manager Andrew Dauro participated in the Direct Endorsement Program, which is a United States Department of Housing and Urban Development (HUD) program that allowed Franklin First to make mortgage loans insured by the Federal Housing Administration (FHA) in the event of a default.

If it was discovered that Franklin First’s mortgages defaulted within the first two years at a rate 100 percent or higher than other lenders in the region, the FHA could have audited, immediately suspended, or sought to permanently remove the company from the Direct Endorsement Program, the U.S. Attorney reports.

Court documents say the company and the employees made surreptitious mortgage payments for borrowers on at least 111 FHA-insured loans that would have become delinquent or gone into default within two years of origination by Franklin First.

Through these actions, officials say Franklin First, Assini, Bertman and Dauro deprived HUD of “critical loan performance information needed to determine whether Franklin First should remain eligible for participation in the Direct Endorsement Program.”

The U.S. Attorney says the men and their company also concealed from HUD the fact that Franklin First was making the loan payments by funneling the payments through the Rainy Day Foundation, a fake charitable organization.

Franklin First, Assini, Bertman and Dauro admitted to making improper payments, which altered the company’s delinquency and default rates, officials say.

The total settlements related to the Rainy Day Foundation scheme was $2,399,000 officials say.

“The civil penalties imposed today send a strong message that fraudulent practices like those committed by the principals of Franklin First will not be tolerated,” FDIC Inspector General Lerner said in a press release.

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