SEC Puts The Brakes On Mortgage Restructuring Scam
The U.S. Securities and Exchange commission (SEC) has announced on October 18, 2011 in SEC Release 2011-213 that it has gotten a court order to put the brakes on a Texan and his company for running a mortgage restructuring scheme. The court order is requested to freeze the assets of James G. “Jay” Temme and his company, Stewardship Fund LLP for committing securities fraud by convincing investors to give them $35 million to purchase and restructure pools of non-performing home mortgages. The scheme apparently began in following the housing market’s nosedive in 2008.
The scheme was aided by various individuals and firms who touted Temme’s investments, including a Texas based publicly traded company that was in the business of restructuring mortgages. A private wealth management group with a large bank also served as major contributor to the success of the scheme by vouching for Temme and his firm.
The investors’ money was supposed to be used to buy non-performing mortgages at a reduced price and then pay investors a return based on the P&I payments they received or based on the subsequent sale of the mortgages or the property. The scheme was perpetrated by the use of fake documents, statements unauthorized transactions. As is typical in these types of Ponzi schemes, money coming in from new investors was used to pay older investors and to line his own pocket, according to the SEC’s Fort Worth Regional Office.
This is not the first time for Mr. Temme. According to recently unsealed documents, he has been the subject of other asset freezes and suits by victimized investors. However, he was not deterred because he continued to operate, open new bank accounts and hustle money from new investors to settle lawsuits filed against him by others.
As is generally the case, the SEC is seeking to permanently enjoin Temme and his company from continuing to run their fraudulent scheme, in addition to seek disgorgement of the illegal gains, restitution to the victims and monetary fines. The case is pending in U.S. District Judge Michael H. Schneider’s Court in Sherman, Texas.