Former Mortgage Executive Charged with Fraud

Lee Farkas, the former head of the now bankrupt mortgage lender Taylor, Bean & Whitaker Mortgage Corp., has been charged in a fraud scheme that led to multibillion-dollar losses and targeted the 2008 federal bank bailout program, Reuters reported yesterday. Farkas was charged with 16 counts including conspiracy, securities fraud and bank fraud, according to an indictment unsealed in U.S. District Court for the Eastern District of Virginia. Prosecutors accused Farkas and unnamed co-conspirators of orchestrating an eight-year scheme that also contributed to the downfall of Colonial Bank, a unit of now-bankrupt Colonial BancGroup, one of the 50 largest banks at the time. The indictment said that Farkas and the co-conspirators tried to misappropriate money from multiple sources, including a lending facility controlled by TBW known as Ocala Funding, which had received funding from Deutsche Bank and BNP Paribas Bank. The alleged scheme also could result in some $3 billion in losses for the Federal Housing Administration and government mortgage guarantor Ginnie Mae, the largest ever for those agencies, said Kenneth Donohue, the Housing and Urban Development Department's inspector general.