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The article was written exclusively by CB Online Staff at the Caribbean Business

New York Mortgage Bankers President Nancy Hernández (below) pleaded guilty Wednesday to violations of the Mortgage Institutions Law in a deal with local prosecutors that apparently will shield her daughter from prosecution in the $1.75 million fraud case.

Prosecutors dropped 22 other counts against Hernández and agreed not to pursue the case against her daughter, New York Mortgage Vice President Noemí Pérez Hernández, Courts Administration spokeswoman Valerie Mercado said.

Hernández’s guilty plea came during a pre-trial hearing at the San Juan Judicial Center. A sentencing for the disgraced financial executive was scheduled for August 31.

The two women were charged in October for allegedly illegally retaining or delaying payments clients made to creditors to pay off old mortgages or loans after obtaining a loan from New York Mortgage Bankers (NYMB). The criminal charges stemmed from an investigation launched in 2003 by the island Financial Institutions Commissioner’s Office (OCIF), the local Justice Department’s Special Investigations Bureau and Justice Department prosecutors.

A total of more than 1,000 counts of illegal appropriation and violations of the Mortgage Institutions Law were originally filed against NYMB, Hernández and Pérez Hernández, including 23 counts of violating the Mortgage Institutions Law.

Authorities said the illegal appropriation totaled $1.75 million - $1.5 million in mortgages and $250,000 in payment stamps.

Mercado said the bankrupt NYMB corporation also pleaded guilty on Wednesday to 23 violations of the Mortgage Institutions Act and 467 charges of aggravated illegal appropriation of public funds.

San Juan Superior Court Judge Elizabeth Llompart ordered the cancellation of NYMB’s certificate of incorporation and imposed a fine of $ 23,000. The government’s case was handled by prosecutors Wilda Nin Rodríguez and Manuel Córdova.

NYMB, the beleaguered local mortgage bank founded by Hernández, filed for a $19.7 million Chapter 7 bankruptcy earlier this year. A Chapter 7 liquidation filing means that the business ceases operations unless continued by the Chapter 7 trustee. The trustee generally sells all the assets and distributes the proceeds to the creditors.

OCIF issued a cease and desist order against NYMB in September 2007 forbidding it from engaging in any type of mortgage business.

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