The president and founder of a Falmouth mortgage company was sentenced earlier this week in federal court in Boston in connection with defrauding Ginnie Mae out of approximately $2.5 million.

Robert Pena, 69, the president and founder of the now-defunct Mortgage Security Inc. (MSI), was sentenced to 32 months in prison, two years of supervised release and ordered to pay $2.5 million in restitution to Ginnie Mae. Pena pleaded guilty to an indictment charging him with one count of conspiracy and six counts of wire fraud in October 2017.

Ginnie Mae, the nickname for Government National Mortgage Association, is a government-run corporation charged with making housing more affordable by injecting capital into the U.S. housing market. Ginnie Mae, which is part of the U.S. Department of Housing and Urban Development, guarantees the timely payment of principal and interest to investors in bonds backed by government-sponsored mortgage loans, such as those offered by the Federal Housing Administration and the U.S. Department of Veterans Affairs.

MSI contracted with Ginnie Mae to pool eligible residential mortgage loans and then sell Ginnie Mae-backed mortgage bonds to investors. MSI was responsible for servicing the loans in the pools it created, including collecting principal and interest payments from borrowers, as well as loan payoffs, and placing those funds into accounts held in trust by Ginnie Mae, which would ultimately pass them along to investors. Among other things, Ginnie Mae required issuers like MSI to provide regular reports to Ginnie Mae concerning the status of the loans in the pools.

Pena began to divert money that borrowers sent to MSI in 2011, depositing high-dollar, loan payoff checks into bank accounts unknown to Ginnie Mae and then using those funds for personal and business expenses.

Pena also diverted borrowers’ escrow funds and mortgage-insurance premiums for his own use. In total, Pena took approximately $2.5 million, which Ginnie Mae then had to pay to investors whose investments it had guaranteed. Pena also attempted to cover up his scheme by providing false reports to Ginnie Mae about the status of the loans MSI was servicing. These false reports made it appear that the loans were still in repayment.

Pena’s co-conspirator, Gilda Andrade, who worked for Pena at MSI and helped Pena file false reports with Ginnie Mae, cooperated with the government’s investigation. Andrade pleaded guilty to a misdemeanor charge of making a false statement to HUD in December 2017, and was previously sentenced to one year of probation and ordered to pay $108,240 in restitution to Ginnie Mae.