A New Jersey man who fraudulently obtained a federally insured mortgage for a West New York rental property today admitted intentionally failing to make loan payments while using $149,000 in rental income from the property for personal expenses, U.S. Attorney Paul J. Fishman announced.
Ruben Vargas, 65, pleaded guilty before U.S. District Judge Freda L. Wolfson to an information charging him with one count of equity skimming.
According to the documents filed in this case and statements made in court:
On Sept. 21, 2007, Vargas obtained a $417,449 mortgage loan insured by the Federal Housing Administration (FHA), a division of the U.S. Department of Housing and Urban Development (HUD), in order to purchase a property located at 5512 Grant Place in West New York.
Vargas had obtained the loan using supporting documentation that contained inflated income, false employment information and false rental history. By March 1, 2008, he had defaulted on the loan by failing to make timely payments. However, Vargas continued to earn nearly $3,000 in monthly rental income from the property by renting the first and second floors to separate tenants.
From March 2008 through December 2013, while in default on the loan, Vargas received approximately $149,000 in rental income. Vargas admitted that he used the funds for personal expenses instead of paying back the mortgage loan.
The federal equity skimming statute prohibits an individual defaulting on a HUD-insured mortgage note from using rental or other income derived from the property for purposes other than the reasonable and necessary expenses of the property. HUD ultimately paid off Vargas’ past due mortgage loan for losses in the amount of approximately $491,000, inclusive of unpaid principal and interest.
The charge for equity skimming to which Vargas pleaded guilty, carries a maximum penalty of five years in prison and a $500,000 fine.
Vargas’s sentencing is scheduled for Aug. 18, 2016.