Justice Department Charges Toms River, N.J. Investors and Title Insurance Owner with Mortgage Fraud

The Justice Department has charged two New Jersey real estate investors and the owner of Universal Abstract, a Lakewood-based insurance company, with participating in a multimillion-dollar mortgage fraud scheme.

Prosecutors say Arthur Spitzer, 37, of Toms River, New Jersey, orchestrated a scheme to defraud landlords and mortgage lenders into obtaining mortgages on properties he did not actually own.

The charges are part of a broader crackdown on mortgage fraud by regulators and prosecutors that has prompted guilty pleas from a number of New Jersey and Brooklyn investors, including Boruch Drillman and Aron Puretz. It’s the first time an official at a title agency or settlement company that handles closing documents has been charged in the scheme.

The Justice Department alleges that Spitzer’s scheme involved seeking properties in New Jersey or Brooklyn with no or a small mortgage. Spitzer allegedly took out mortgages from lenders at least six times on properties he did not own. Spitzer then allegedly used fraudulent documents to transfer control to himself.

The documents contained forged signatures of the real property owners. The loan proceeds were allegedly paid into bank accounts controlled by Spitzer or were used by Spitzer to pay off other debts.

Loans became non-repayable and the real property owners were left to fend for themselves, facing either mortgage foreclosure or eviction.

According to prosecutors, Spitzer also conspired with Mendel Deutsch, 38, of Toms River, New Jersey, and Joshua Feldberger of Howell, New Jersey, to make it appear that Spitzer owned three residential properties on Malcolm X Boulevard in Brooklyn and that he intended to sell them to Deutsch.

The Justice Department alleges that Spitzer defrauded a lender to obtain a $4 million loan for the transaction. The proceeds of the loan were paid into bank accounts controlled by Spitzer, the Justice Department alleges.

Prosecutors say Feldberger played a key role in the conspiracy.

Feldberger, as owner of the settlement firm, facilitated the transaction. The settlement firm is not named in the indictment, but other court documents link Feldberger to Universal Abstract.

Feldberger and Universal Abstract did not respond to requests for comment.

The defendants allegedly prepared and sent letters claiming that Deutsch had deposited a significant amount of funds into a trust to fund the Brooklyn transaction, when he had not done so.

The Justice Department alleges that the co-conspirators created false documentation to transfer control of the properties to Spitzer. They also allegedly lied to the mortgage lender, claiming that the settlement company received $2 million from Deutsch at closing, which prompted the mortgage lender to make the loan.

The defendants then used the mortgage money to finance Deutsch’s down payment on a property in Brooklyn.

In a separate scheme, prosecutors say Spitzer and Deutsch also fraudulently obtained $3 million in government loans intended for small businesses affected by the COVID-19 pandemic. Both investors submitted loan applications using false information about the number of employees, revenue, cost of goods sold or lost rent at their companies.

These allegations differ from other mortgage fraud allegations recently made by the Justice Department.

The federal agency has largely prosecuted real estate investors for illegally reselling properties to related parties to obtain larger loans than they otherwise could have obtained. Other cases have involved property owners inflating financial information about properties to obtain larger mortgages. Most of these loans were sold to Fannie Mae or Freddie Mac. That has caused the government-sponsored agencies to tighten their lending rules.

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