The Department of Justice charged two New Jersey real estate investors and the owner of Lakewood-based title insurer Universal Abstract in a multi-million dollar mortgage fraud scheme.
Prosecutors allege Arthur Spitzer, 37, of Toms River, New Jersey, orchestrated a scheme to defraud property owners and mortgage lenders into obtaining mortgages for properties he did not actually own.
The charges come as part of a broader crackdown into commercial mortgage fraud by regulators and prosecutors. The push has led to a number of guilty pleas from New Jersey and Brooklyn investors such as Boruch Drillman and Aron Puretz. This is the first time an officer of a title agency or settlement company, which handles closing documents, has been charged in the scheme.
The DOJ alleges Spitzer’s scheme involved seeking out New Jersey or Brooklyn properties with no mortgage or a small mortgage attached. Spitzer allegedly took out mortgages from lenders at least six times on properties he did not own. Spitzer then allegedly used fraudulent documents to transfer control to himself.
These documents contained forged signatures of the true property owners. The loan proceeds were allegedly disbursed to bank accounts controlled by Spitzer or were used by Spitzer to pay off other debts.
The loans went into default and the true owners of the properties were left on the hook where they either faced foreclosure or eviction.
According to prosecutors, Spitzer also conspired with Mendel Deutsch, 38, of Toms River, New Jersey, and Joshua Feldberger of Howell, New Jersey, to make it look as though Spitzer owned three residential properties on Malcolm X Boulevard in Brooklyn and would sell the properties to Deutsch.
The DOJ alleges Spitzer duped the lender to obtain a $4 million loan for the transaction. Those loan proceeds were disbursed to bank accounts controlled by Spitzer, the DOJ alleges.
Feldberger played a crucial role in the scheme, according to prosecutors.
Feldberger, as the owner of a settlement company, facilitated the transaction. The settlement company was not named in the indictment, but other civil court documents link Feldberger to Universal Abstract.
Feldberger and Universal Abstract did not return a request for comment.
The defendants allegedly created and sent letters stating that Deutsch deposited significant funds into escrow toward the transaction in Brooklyn, when he had not.
The DOJ alleges the co-conspirators created fake documentation to transfer control of the properties to Spitzer. They also allegedly lied to the mortgage lender by claiming the settlement company received $2 million from Deutsch at closing, which led the mortgage lender to make the loan.
The defendants then used the mortgage loan proceeds to fund Deutsch’s down payment on the Brooklyn properties.
In a separate scheme, prosecutors allege Spitzer and Deutsch also fraudulently obtained $3 million in government loans that were intended for small businesses distressed by the COVID-19 pandemic. The two investors submitted loan applications using false information about their companies’ number of employees, revenues, cost of goods sold, or lost rents.
These allegations differ from the other recent mortgage-fraud charges brought by the DOJ.
The federal agency has largely been prosecuting real estate investors for illegally flipping properties to related parties in order to obtain larger loans than they otherwise would have received. Other cases involved property owners inflating property financials to obtain larger mortgages. Most of these loans were sold to Fannie Mae or Freddie Mac. This has led the government sponsored agencies to tighten their lending rules.
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