Opinion

Brokers Should Check Title Report

 

MORTGAGE BROKERS SHOULD HAVE THE BORROWERS REVIEW THE PRELIMINARY TITLE REPORTS CAREFULLY

FACTS

If the borrower-buyer is buying into a home that is in a common interest development or planned unit development it should appear on the preliminary title report. The buyer should be cautioned then to get a copy of the covenants, conditions and restrictions to review. These clearly indicate a home owners association and the restrictions that the buyer would have to go through to make any additions, changes or improvements. Many HOA’s restrict the type of improvements, the color schemes and the styles. Check out the easements, not just the public ones for utilities but others that a neighbor might have. Check to make certain all liens are covered for payments that are listed in the report.

One very important thing−the preliminary title report does not bind the title company. If there is an error in it, the only remedy is usually refund of the cost of the preliminary title report. Remind the homeowner to be that when the actual title report arrives it should be checked to be certain there are not additions or deletions from the preliminary report. There have been cases where the title company missed a tax lien and the homeowner had to go through the aggravation of having to get the title company to remove it.

One last warning: Some homeowners are told that they can transfer the property to their revocable trust or any other entity after buying it. This raises two very serious potential problems:

  1. The transfer (even though to a revocable trust) is a voluntary transfer and can negate the title policy so that the homeowner is no longer covered. So to cure this have the homeowner checks with the title company to be sure there is still coverage and obtain the response in writing or obtain a 107.9 endorsement to add the trust to the title policy.
  2. The homeowner’s insurance policy is in the name of the homeowner to protect against liability and damages if the home is destroyed for some reason. When transferred to a revocable trust first check with the insurance company to see if there is still coverage. If not then get an endorsement to add the trust to the policy so there is still coverage. Otherwise the homeowner may wind up with “forced insurance” which is very very expensive or the lender calling in the note for making the transfer without consent of the lender. If a transfer is made to an entity that is not a living trust, this becomes even more imperative and could lead to litigation because of no coverage. This would occur if the home is partially or totally destroyed for some reason (e.g. tornado, earthquake, hurricane, fire, etc.) or the buyer is sued because someone suffers an injury on the property and because title is transferred without the homeowner’s policy being updated, the insurance he has could very likely deny coverage.

MORAL
Look before you leap. Or contact competent legal counsel to check before any transfer is made, not after.

ARIZONA AG FILES TWO LAWSUITS AGAINST LOAN MOD COMPANIES ALLEGING COLLECTING ADVANCE FEES

FACTS

On Aug. 15, Arizona Attorney General Tom Horne filed two suits against mortgage modification companies. One names Making All Homes Affordable LLC and its owner Albert Figueroa; the other is against  La Paz Source LLC, La Placita Multi Services LLC, Maria Beltran, her husband Francisco Ramos and Beltran’s partner in La Placita, Arturo Gomez Leon.

The lawsuit against MAHA alleges that MAHA and Figueroa violated the Consumer Fraud Act by misrepresenting the nature and value of the MAHA program, which MAHA advertises exclusively in Spanish language media and sells in face-to-face meetings in MAHA’ office and at several “retail outlets” in Phoenix and Tucson, including at the office of La Placita.

The lawsuit alleges that MAHA salespersons tell potential clients that MAHA can help them obtain specific, favorable mortgage modifications, including lower interest rates and principal reductions. After homeowners pay MAHA nearly $1,900, homeowners discover that the MAHA program is nothing more than a do-it-yourself program, allowing them access to various standardized forms and information on MAHA’s website; forms and information that are available for free on government websites, such as www.makinghomeaffordable.gov. The lawsuit also alleges that MAHA uses dozens of fake consumer testimonials on its website and that MAHA charges its clients a fake sales tax of 9.3%. 

Consumers have reported that La Paz Source promised to stop the foreclosure process, obtain loan modifications for its consumers and communicate with lenders/servicers on behalf of its clients. As La Paz Source, the defendants allegedly claimed they were authorized to conduct such business in Arizona when they were not duly licensed to conduct their business in Arizona. Oftentimes, La Paz Source charged very large upfront fees, which were prohibited by state and federal law, and then failed to provide the mortgage loan modification services required to earn those fees. In some cases, the clients lost their homes in the process. 

In November of 2011, Defendants Beltran and Ramos dissolved La Paz Source, LLC. The same day that the Defendants dissolved La Paz, Beltran and Arturo Gomez Leon started La Placita which also held itself out as being a provider of mortgage loan modification services to Arizona consumers.

The defendants deceptively and willfully targeted the Spanish-speaking community to obtain a benefit through the exploitation of the consumers’ Spanish/English language barrier. The defendants provide contracts written only in English. Many times, the defendants verbally explain terms of the agreement to consumers, in Spanish, that are in direct contradiction to the written provisions of the contract provided in English. 

The La Paz and La Placita defendants now claim to have changed their business model to that of a retail outlet for MAHA. (azagpr881513)

MORAL

If anyone says anything about being able to modify your loan and wants to collect an upfront fee it is illegal under federal law, Arizona law, California law as well as many other states. Remember if the organization soliciting you wants an upfront fee then run do not walk to the nearest exit.

SAN DIEGO REAL ESTATE DEVELOPER CHARGED IN LOUISIANA WITH MORTGAGE FRAUD

FACTS

On Aug. 20, Mark Hoffman was charged in a one-count bill of information with wire fraud, announced United States Attorney Dana J. Boente.

According to the bill of information, in late 2008, Hofmann sought investors to invest approximately $3,000,000 for the acquisition of an approximately five-acre tract of land adjacent to the Lakeview Regional Medical Center in Covington, La., and for the development of two office buildings on that land. Ultimately, Hofmann and his partner convinced Bolivar Investors Group LLC, an investment group organized by members of the Crescent River Port Pilots’ Association, to invest the money. Together, Hofmann, his partner, and Bolivar created a new entity, Newtrac West, to facilitate the purchase and development in February 2009. Shortly thereafter, Hofmann and his partner opened a bank account in the name of Newtrac West for which only they were listed as signatories. Between Jan. 20, 2009 and July 14, 2009, Bolivar made six deposits, including five by wire, into the Newtrac West bank account, totaling approximately $3,000,000.

The bill of information further alleges that between Jan. 26, 2009 and Dec. 14, 2009, on at least 24 occasions, Hofmann withdrew funds from the account without authorization and used them to repay his personal expenses and debts apart from and unrelated to the purchase or development of the land in Covington. In total, Hofmann misappropriated approximately $404,000. Subsequently, Hofmann and his partner created doctored bank statements based on the real bank statements for the Newtrac West account that were designed to hide the unauthorized withdrawal of funds for Hofmann’s personal use and, further, to deceive representatives of Bolivar into believing that Newtrac West was in excellent financial condition. Hofmann provided these fraudulent statements to Bolivar’s representatives regularly.

If convicted, Hofmann faces a maximum term of imprisonment of not more than 20 years, followed by up to three years of supervised release, and a $250,000 fine. (usattedla82013)

MORAL

He had to go to Louisiana? Or did the alleged offense start in San Diego and affect Louisiana? In either event Louisiana is pretty humid if he is convicted.

IOWA MORTGAGE COMPANY OWNER GETS 7.5 YEARS IN PRISON FOR MORTGAGE FRAUD

FACTS

On Aug. 19, 2013, Paul Kramer was sentenced to 90 months in prison for wire fraud, bank fraud, and conspiracy.

Between 2006 and 2009 Kramer used Kramer Mortgage and Iowa Closing and Escrow to defraud multiple lenders of over $1 million. Kramer executed the fraud, in part, in connection with real estate development company LDF. Kramer and the members of LDF, including Lane Anderson, orchestrated straw sales of 13 properties to another LDF member, Shannon Flickinger. LDF was the true buyer, but LDF could not qualify for financing for the purchase of the properties because the company already had too much debt. Flickinger was used as a straw buyer to obtain the financing to purchase the additional homes. At Kramer’s direction and with Kramer’s oversight Kramer Mortgage submitted loan applications in which Flickinger was named as the buyer despite the fact that Kramer knew that LDF was the true buyer. With Kramer’s knowledge, Flickinger’s income was grossly inflated in the applications in order to qualify him for the loans. After Flickinger’s fraudulent loan applications were approved, the straw sales were closed at Kramer’s mortgage company with Kramer’s knowledge. Kramer closed the sales despite the fact that Flickinger paid no down payments for any of the properties, contrary to the documentation that was provided to the lenders.

Kramer defrauded one particular bank by intentionally concealing the sales of properties that had been pledged to the bank as collateral for a $4 million line of credit for Kramer. After the sales of multiple properties in which the proceeds were owed to the bank, Kramer kept the proceeds and used them to pay his own personal or business expenses. Kramer also pledged several properties to more than one bank, without the banks’ knowledge, to obtain additional loans. Kramer’s activities resulted in the primary bank suffering significant losses and also left many homeowners unable to sell or refinance their homes because they did not have clear title to their properties. Some homeowners were threatened with foreclosure due to Kramer’s activities. (usattysdiowa82113)

MORAL

Did you notice how the sentences are getting stiffer and stiffer? So far none of ours have risen to such heights. Good luck or good legal representation?

 

THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE. AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.

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