STARTING JAN. 10, 2014 REAL ESTATE SALES PERSONS OR BROKERS CAN BE CONSIDERED MORTGAGE LOAN ORIGINATORS UNDER CERTAIN CONDITIONS
The Consumer Financial Protection Bureau’s 12 CFR 1026.36(a)(1) includes in the commentary at Supplement I to Part 1026-Official Interpretations the following:
Section 1026.36- Prohibited Acts or Practices and Certain Requirements for Credit Secured by a Dwelling
1. Meaning of loan originator. i. General. A. Section 1026.36(a) defines the set of activities or services any one of which, if done for or in the expectation of compensation or gain, makes the person doing such activities or performing such services a loan originator, unless otherwise excluded. The scope of activities covered by the term loan originator includes:
1. Referring a consumer to any person who participates in the origination process as a loan originator. Referring includes any oral or written action directed to a consumer that can affirmatively influence the consumer to select a particular loan originator or creditor to obtain an extension of credit when the consumer will pay for such credit.
It would appear that a real estate salesperson selling a home to a buyer that refers the buyer to a particular loan originator or creditor (lender) or a loan originator that works for the lender and expects compensation becomes a loan originator and thereby gets into trouble if reported to CFPB. Do you have an opinion? This is how I read the new regulation that goes into effect on Jan. 10, 2014.
THE 3% RULE FOR MORTGAGE LOAN ORIGINATORS IS AFFECTED BY PMI
The qualified mortgage rule’s 3% points and fees cap can be affected by mortgage insurance. The final qualified mortgage rule enacted by the Consumer Financial Protection Bureau exempts upfront premiums that Federal Housing Administration charges from the 3% cap. The FHA upfront fee is currently 175 basis points.
PMI upfront premiums that exceed 175 bps will be included in the 3% cap, according to the finale qualified mortgage rule that goes into effect on Jan. 10, 2014. PMI upfront premiums can be as high as 250 bps. If a PMI premium payable at or before consummation exceeds the FHA insurance premium, “the portion of the private mortgage insurance premium that exceeds the FHA premium must be included in points and fees,” as published by the CFPB. (Compliments of CAMP re basis point charges and example.)
When you have PMI on a loan watch out for the basis points charged by a PMI that is not FHA and I believe the QM rule also mentions it must have a pro rata refund under certain conditions.
ADVERTISING HARP 2.0 INTEREST RATES WITHOUT A TAX WARNING CAN LEAVE A BROKER OR LENDER POTENTIALLY LIABLE FOR FALSE ADVERTISING OR OPEN TO A CONSUMER LAWSUIT
(h) Tax implications. If an advertisement distributed in paper form or through the Internet (rather than by radio or television) is for a loan secured by the consumer's principal dwelling, and the advertisement states that the advertised extension of credit may exceed the fair market value of the dwelling, the advertisement shall clearly and conspicuously state that:
(1) THE INTEREST ON THE PORTION OF THE CREDIT EXTENSION THAT IS GREATER THAN THE FAIR MARKET VALUE OF THE DWELLING IS NOT TAX DEDUCTIBLE FOR FEDERAL INCOME TAX PURPOSES; AND
(2) THE CONSUMER SHOULD CONSULT A TAX ADVISER FOR FURTHER INFORMATION REGARDING THE DEDUCTIBILITY OF INTEREST AND CHARGES. (12cfr1026.24)
Warn the consumer or the broker and/or lender funding the loan could possibly find themselves in a class action lawsuit or disciplined by the licensing agency, CFPB or worse yet FTC. If you have questions contact Herman Thordsen, Esq.
CONNECTICUT RESIDENT GETS 37 MONTHS IN FEDERAL PRISON FOR MORTGAGE FRAUD
On Feb. 20, Eric S. Scherz was sentenced by United States District Judge Vanessa L. Bryant in Hartford to 37 months of imprisonment followed by three years of supervised release for mortgage fraud offenses.
In October 2007, Scherz secured a $417,000 mortgage loan to finance the purchase of a property in Barkhamsted, Conn. In April 2008, Scherz created a fraudulent release of mortgage on the property stating that the lender, a fictitious company Scherz created, had received full payment of the loan. Scherz subsequently filed the fraudulent release of mortgage with the Town of Barkhamsted.
Scherz stopped making payments on his mortgage in March 2009, but in April 2009, he made three fraudulent payments via wire transfer to his mortgage lender that he knew would be and were, in fact, reversed for insufficient funds.
In May 2009, Scherz sold the Barkhamsted property for $299,000 to a buyer who relied on the fraudulent release of mortgage as being genuine. At the time of the sale, Scherz’s unpaid principal balance on his mortgage was $410,718.56. Scherz did not use any of the $299,000 from the fraudulent sale to his pay his outstanding mortgage debt.
On Jan. 6, 2012, Scherz waived his right to indictment and pleaded guilty to three counts of wire fraud. Scherz has previously served a 70-month federal term of imprisonment for his role in a mortgage fraud scheme in Florida in the 1990s. (usattct22113)
I guess he enjoyed the first accommodations so well, he wanted to go back for a second visit.
PENNSYLVANIA MORTGAGE BROKER AND LOAN OFFICERS GET PRISON FOR MORTGAGE FRAUDFACTS
On Feb. 13, Dennis Nicholas, Bernadette Nicholas and Kevin McAllister were sentenced for engaging in schemes to defraud Wilmington Trust Federal Savings Bank and Malvern Federal Savings Bank that involved properties valued at more than $35.5 million. Dennis Nicholas was sentenced to 72 months in prison; Bernadette Nicholas was sentenced to 42 months in prison; and McAllister was sentenced to 20 months in prison. In addition to the prison terms, U.S. District Court Judge Legrome D. Davis ordered Bernadette Nicholas and Kevin McAllister to jointly pay restitution to Wilmington Trust in the amount of $2.5 million; ordered Bernadette Nicholas to pay restitution to Malvern Federal Savings in the amount of $2.5 million; and ordered Dennis Nicholas to pay restitution to Malvern Federal Savings in the amount of $2,755,909.27.