Court-ordered Consent Decree Resolves Civil Suit Alleging Defendants Engaged in Schemes to Defraud the Department of Housing and Urban Development

Court-ordered Consent Decree Resolves Civil Suit Alleging Defendants Engaged in Schemes to Defraud the Department of Housing and Urban Development

Brooklyn, NY – April 28, 2009 – (RealEstateRama) — Benton J. Campbell, United States Attorney for the Eastern District of New York, today announced that Madison Home Equities, Inc., a mortgage lender located in Carle Place, Long Island, and Madison’s president, Nadine Malone, have entered into a consent decree and judgment that permanently enjoins them from making loans insured by the Federal Housing Administration (FHA), an agency of the United States Department of Housing and Urban Development (HUD). The consent decree further enjoins Madison and Malone from participating in any federal program involving mortgage loans. The Consent Decree and Judgment was approved by United States District Judge Nicholas G. Garaufis.

The Consent Decree and Judgment resolves allegations made by the United States in a civil complaint filed in October of 2008 that Madison and Malone committed fraud in connection with HUD’s Direct Endorsement Program. Under that program, Madison was authorized to make mortgage loans that were insured by the FHA in the event of default. As alleged in the complaint, Madison certified that it had complied with HUD lending criteria concerning the eligibility of borrowers when, in fact, Madison had not done so. On October 23, 2008, the court granted the United States’ application for a temporary restraining order and enjoined the defendants from originating new FHA-insured mortgages. The Consent Decree and Judgment makes that ban permanent and extends it to all federal mortgage programs.

Simultaneously with the consent decree, the defendants entered into a settlement agreement resolving HUD administrative claims, which provides for the payment of penalties, indemnification of HUD against loss on mortgages originated by Madison, and the permanent withdrawal of Madison from HUD programs.

“This case ends one company’s abusive lending practices, and demonstrates the commitment of this Office, in partnership with HUD, to eradicate fraud against the FHA mortgage insurance program,” stated United States Attorney Campbell. “We will vigorously seek to use all means at our disposal to stop those who engage in such activity.” Mr. Campbell thanked the Office of the Inspector General for the Department of Housing and Urban Development for its investigative support throughout the case, as well HUD’s Office of General Counsel, Office of Program Enforcement, and HUD’s Quality Assurance Division.

In May 2008, Mr. Campbell announced the formation of a task force comprised of federal, state, and local law enforcement agents and investigators to address the burgeoning problem of mortgage fraud.

The United States’ case was litigated by Assistant United States Attorneys Kevan Cleary, Edward K. Newman, and John Vagelatos. HUD’s Administrative case was handled by Dane Narode, Associate General Counsel for Program Enforcement, and Michael J. Milner, Trial Attorney.

United States Attorney’s Office
Eastern District of New York

Robert Nardoza
Public Affairs Officer
(718) 254-6323
Robert.Nardoza (at) usdoj (dot) gov

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