National mortgage finance company Fannie Mae and a major provider of title insurance for commercial properties are ordering extra scrutiny for any new purchase or refinance transactions involving properties owned by Rochester developer Robert C. Morgan.
The new directives from Washington, D.C.-based Fannie Mae and Stewart Title Insurance Co. demonstrate a tightening of the reins around Morgan and his real estate empire, as he battles both criminal charges and a federal civil lawsuit by the Securities and Exchange Commission. The mandates could make it harder for Morgan to sell or refinance his properties, since they would restrict two major industry firms from backing or insuring the loans.
Fannie Mae, one of two government-sponsored entities chartered to support mortgage lending, issued a new directive July 25 that requires "additional underwriting due diligence" be performed on "any new mortgage loan during underwriting," according to an email to lenders from a Fannie Mae vice president, obtained by The Buffalo News.
The email said the changes are a result of the federal mortgage fraud indictment against Morgan and his company, Morgan Management, that included allegations of "falsifying rent rolls, financial statements, vendor contracts, insurance loss claims and other records."
For any deal involving a Morgan property, Fannie Mae wants lenders to document that the U.S. Department of Justice will "consent to the transfer" and not seek forfeiture of the property or any funds.
Lenders also must conduct an audit of all the leases on all units, "regardless of the property size," and must inspect more than the minimum number of units to confirm that the actual occupancy matches the rent roll and lease audit. The indictment charged Morgan and three other defendants with inflating rent rolls and income, and even creating dummy tenants by hiring people to occupy apartments while a property was being inspected.
Finally, the lender must confirm that neither Morgan nor any of his relatives or "affiliates" owns directly or indirectly any stake in the new borrower. That would raise questions about Morgan's new joint-venture with Morgan Properties of King of Prussia, Pa., a separate company that is taking over management of dozens of properties, since the Rochester-based Morgan would retain some ownership in those properties.
Separately, Stewart Title issued a bulletin in late June to its offices in 10 states instructing them "not to accept any orders or close any transactions" involving Morgan, six other individuals or 14 other entities without "written approval of a Stewart Legal Services representative." The bulletin was obtained by The Buffalo News.
The other named individuals are Morgan's son, Todd; his nephew, Kevin; his finance chief, Michael Tremiti; his former chief operating officer, Scott W. Cresswell; and two Buffalo mortgage brokers, Frank Giacobbe and Patrick Ogiony.
Robert Morgan, Todd Morgan, Tremiti and Giacobbe are charged in the indictment. Kevin Morgan, Cresswell and Ogiony have pleaded guilty to federal charges and are cooperating with prosecutors. The entities include Morgan companies; Giacobbe's brokerage firm, Aurora Capital Advisors; and Cresswell's successor to Morgan Management, Grand Atlas Property Management.
The bulletin also cites, by name, 147 properties in Alabama, Delaware, Illinois, Indiana, Kentucky, New York, North Carolina, Ohio, Pennsylvania, South Carolina and Tennessee. The list includes Amherst Gardens Apartments, Park Place, Maplewood Estates Apartments, Green Lake Apartments, Morgan Ellicott Apartments, Paradise Lane Apartments and Raintree Island Apartments – all in Erie County.
Story topics: criminal charges/ Fannie Mae/ indictment/ insurance fraud/ jonathan d. epstein/ justice department/ Morgan Communities/ morgan management/ mortgage fraud/ Robert C. Morgan/ Stewart Title/ wire fraud