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BUFFALO---A Buffalo landlord has pleaded guilty to directing the payment of hundreds of thousands of dollars in relation to his role in a mortgage fraud scheme.
Robert Palano, 51, formerly of Clarence, pleaded guilty to frand larceny in the third degree, a class D felony, and scheme to defraud in the first degree, a class E felony. He faces two to seven years imprisonment.
In related civil actions, Palano agreed to pay $1.5 million in restitution and penalties and to be permanently barred from owning investment properties in Buffalo. Michael Heigel, Palano's real estate appraiser, also agreed to pay $55,000 in restitution.
A 15-month civil investigation by the Attorney General's office revealed that, between 1998 and 2002, Palano fraudulently obtained more than $4 million dollars in mortgage loans on 104 rental properties he owned on the East Side of Buffalo. After pocketing the loan proceeds, Palano absconded to Florida, leaving at least 10 lenders with defaulted loans secured by properties worth far less than the debt, and tenants being evicted through foreclosures.
The investigation revealed that Palano used Heigel to do all of his appraisals which were grossly inflated over the true market value.
The charges in the criminal case arise out of a series of 29 fraudulent loan applications submitted by Palano between March and November 2002 to GMAC Mortgage Corporation. According to legal documents, Palano lied on the applications when he declared that he was not at that time a party to any civil litigation. In fact, Palano was then the defendant in an unrelated mortgage fraud case brought by The Associates First Capital Mortgage Corporation.
By December 2003, Palano had defaulted on all 104 loans and as a result, lenders were left holding collateral that was inadequate to pay off the balance. The consequent foreclosures resulted in the eviction of dozens of families from the rental properties and caused further blight of the neighborhoods as boarded up houses were left vacant for months.
Many of the defaulted loans covered by the civil settlement had been resold by the lenders to Fannie Mae, a federally-chartered institution that buys mortgage loans for the purpose of increasing the availability and affordability of housing for low- and moderate-income Americans. The terms of the civil settlement require Palano to pay $1.4 million to Fannie Mae to reimburse its losses.
This is the second time Spitzer's office has cited Palano in a mortgage fraud case. A 2001 investigation by the Attorney General's office found that Palano orchestrated a real estate scheme that targeted African-American, first time home buyers. In resolving that case, Palano agreed to pay $225,000 in restitution to his victims and The Associates agreed to reduce the mortgages of 130 properties by a total of $1.6 million. The Associates later civil action against Palano in this matter was the litigation he failed to report. 4-27-06
© 2006 North
Country Gazette
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