Perpetrator of $60 million refinancing fraud scheme sentenced

A New Jersey man who defrauded lenders and investors of at least $60 million has been sentenced to 97 months in prison after pleading guilty to federal charges last month.

Seth Levine, 53, of Teaneck, New Jersey, was sentenced last week in a Newark federal court after pleading guilty charges of bank fraud and securities fraud, the U.S. Attorney’s Office for the District of New Jersey announced. He conducted the fraudulent activity between 2009-2019 as owner of Norse Holdings, a company with more than 70 subsidiaries with a portfolio of approximately 2,500 apartments across more than 70 multifamily properties.

Levine and other unnamed people obtained refinances from unnamed lenders through forged signatures, false information about expenses, rents collected, the number of apartments leased and other financial information, feds said. Lenders, who sold Levine’s loans to Fannie Mae and Freddie Mac, gave him cash payouts that he and others used for their own enrichment and to perpetuate the scheme.

Because the properties were overvalued and rents couldn’t cover mortgage payments, Levine obtained additional cash-out refis to keep the scheme afloat, according to prosecutors. Feds estimated an outstanding balance of more than $150 million on the fraudulently-obtained mortgages at the time of the scheme’s discovery. Included were 40 mortgages held by Freddie Mac with a combined $103 million outstanding loan balance.

Levine also defrauded unnamed investors of at least $13 million in a securities fraud, feds said, by lying about the condition of the properties, selling ownership interests, onboarding additional investors and obtaining refis without investor consent. He’ll undergo five years of supervised release following his prison term and faces a June restitution hearing. The Securities and Exchange Commission also has a pending civil suit against Levine over the securities fraud.

Feds charged Levine in March amid heightened scrutiny surrounding mortgage fraud, which costs lenders more per dollar than other types of financing. The government-sponsored entities recorded a 65% spike in fraudulent activity reports last year amid record-purchase lending and a 17-year high in cash-out refinances.