NY attorneys charged in million-dollar short sale scam by Ryan Smith | Apr 14, 2014

Two New York lawyers are facing charges that they bilked home buyers, mortgage lenders and homeowners in a million-dollar short sale mortgage scam.

Kennethe Schwartz, 64, and Helene Stetch, 50, have each been charged with numerous counts of grand larceny and possession of stolen property, according to a New York Newsday report. Stetch was also charged with four counts of second-degree possession of a forged instrument, three counts of first-degree falsifying business records and one count of first-degree scheme to defraud.

Prosecutors say that Schwartz’s law firm represented sellers, buyers and lenders in the sale of five houses in the Queens area between 2008 and 2010. in each case, the seller was attempting to avoid foreclosure by selling the home in a short sale, according to Newsday.

After the transactions, however, the sellers began to receive foreclosure notices on the homes and realized that the closings they believed to have been approved had never gone through, Newsday reported.

“In one instance, it is alleged that the defendants arranged for only a portion of the homeowner’s debt to be paid off while retaining a major portion of the mortgage proceeds for themselves,” Queens District Attorney Richard A. Brown said in a statement.

Schwartz’s attorney, meanwhile, maintains that the mortgage scam was orchestrated by Stetch – who was employed at the law firm until being fired in mid-2010 – without Schwartz’s knowledge.

“This is a case where a rather prominent lawyer has a quite extensive real estate law practice, and hired a lawyer who, unbeknownst to him, was manufacturing sham real estate transactions,” attorney Richard Rehbock said. “It was Mr. Schwartz who went to the police when he uncovered this problem.”

Rehbock maintained that Stetch was fired because Schwartz began to find irregularities, including forged checks, in cases on which Stetch worked.

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