Lenders poised to take over apartment empire amid massive mortgage fraud probe

Investigation raises concerns about multifamily lending standards

National /
May.May 01, 2019 04:00 PM
Morgan Management's Robert C. Morgan and the Avon Commons apartment complex in Avon, N.Y. (Credit: Rochester Institute of Technology)

Morgan Management’s Robert C. Morgan and the Avon Commons apartment complex in Avon, N.Y. (Credit: Rochester Institute of Technology)

Rochester-based Morgan Management nearly tripled its apartment holdings over the past decade, building a giant rental portfolio of 140 properties across 14 states with more than 34,000 units.

But amid a massive mortgage fraud investigation which has already led to two guilty pleas, the company has started to shed properties.

Under pressure from creditors who hold about $3 billion in the company’s debt, Morgan is close to transferring the management of nearly its entire portfolio to Harbor Group International, the Wall Street Journal reported.

Prosecutors in the case, one of the largest mortgage fraud investigations since the financial crisis, allege that Morgan executives and their mortgage brokers secured about $500 million in financing fraudulently, both by falsifying documents and by dressing up apartments to look occupied.

Company executive Kevin Morgan, nephew to founder Robert C. Morgan, pleaded guilty to conspiracy to commit bank fraud late last year. Mortgage broker Patrick Ogiony plead guilty to the same charge in March, saying that his crimes involved 20 Morgan properties in New York, Pennsylvania, Illinois, Texas, South Carolina and North Carolina. Robert Morgan has not been charged.

The investigation has raised questions about whether multifamily lenders, including Fannie Mae and Freddie Mac, examine borrower income closely enough. Multifamily loans are not subject to the stricter rules that were introduced for single-family mortgages post-crisis.

In New York, Morgan has already lost one property in Syracuse to a lender, while another complex in Watertown is facing foreclosure. Though few of Morgan’s loans are delinquent, most mortgages have provisions that they are in default if obtained through fraud, which creditors believe empowers them to take action. [WSJ] — Kevin Sun


Related Articles

arrow_forward_ios
With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)

Real estate stocks push up this week as U.S.-China trade tensions ease

Real estate stocks push up this week as U.S.-China trade tensions ease
416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)

Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case

Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case
Before the pandemic, national tenants paid 94 percent of rent. (Getty)

Retail rent collections rebound to 90%

Retail rent collections rebound to 90%
Cindat Capital Management CEO Greg Peng and Hersha Hospitality Trust CEO Jay Shah with 51 Nassau Street (Google Maps)

7 Manhattan hotels head to auction block

7 Manhattan hotels head to auction block
As companies leave Silicon Valley, Austin, Texas is becoming a top destination. (Getty)

Silicon Valley exodus: Where’d everyone go?

Silicon Valley exodus: Where’d everyone go?
TF Cornerstone President Frederick Elghanayan with 2-10 54th Avenue and 55-01 Second Street in Long Island City (Google Maps)

The 10 biggest new project filings in NYC

The 10 biggest new project filings in NYC
Gov. Andrew Cuomo announced that a major development surrounding Penn Station. (Getty)

Cuomo adds housing to $51B Midtown West project

Cuomo adds housing to $51B Midtown West project
Alex Sapir (Getty)

Former Sapir employee accuses company of retaliation

Former Sapir employee accuses company of retaliation
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...