Quantcast

Could CFPB Consider Real Estate Brokers as Loan Officers?

FEB 28, 2013 3:53pm ET
Print
Email
Reprints
Comments (3)
Twitter
LinkedIn
Facebook
Google+

        STARTING JAN. 10, 2014 REAL ESTATE SALES PERSONS OR BROKERS CAN BE CONSIDERED MORTGAGE LOAN ORIGINATORS UNDER CERTAIN CONDITIONS

FACTS

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.

MORAL

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

FACTS

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.)

MORAL

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

FACTS

 (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)

MORAL

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

FACTS

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)

MORAL 

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.

Bernadette Nicholas was a mortgage broker who intentionally misrepresented material facts to Wilmington Trust about borrowers’ income and assets, the potential rental income, and accurate appraisals of properties. She falsified borrowers’ tax returns and documents relating to the true source and amount of the down payments being made by borrowers and forged borrowers’ signatures on loan documents.

Kevin McAllister was a loan officer with Wilmington Trust working in conjunction with Nicholas to approve mortgage loans for borrowers who did not meet Wilmington Trust’s criteria for income, assets, and credit scores, in return for bribes and kickbacks from Nicholas. As a result, Nicholas and McAllister caused the approval of loans totaling more than $30 million.

Bernadette Nicholas received a mortgage broker’s commission equivalent to approximately two to three percent of the total amount of a funded loan at the time of loan settlement. During the years 2004, 2005, and 2006, Bernadette Nicholas received approximately $1.2 million as the result of the loans funded by Wilmington Trust. She deposited the money into accounts maintained by Dennis Nicholas who then paid Kevin McAllister equivalent to approximately one percent of the amount of the funded loan, which was a kickback/bribe for getting the questionable loan approved and funded. McAllister made $379,075 in kickbacks. None of the defendants reported the income on their taxes.

Another defendant, Wayne Rosen, who was charged in a scheme with Bernadette Nicholas to defraud Malvern Federal, was scheduled to be sentenced on Feb 25. Nicholas brokered the sale of an apartment building between Rosen and mortgage clients and sought a $1.6 million loan from Malvern Federal for her clients.

Nicholas altered the borrowers’ income tax returns prior to submitting them to Malvern Federal and falsely represented the borrowers’ income, the amount of the borrowers’ down payment, and the details of a subordination agreement between Rosen and the borrowers on the borrowers’ loan application and supporting documents. At settlement on the apartment building, Dennis Nicholas, Bernadette Nicholas, and Rosen falsely represented to Malvern Federal that the borrower had made a down payment. Bernadette Nicholas and Rosen applied for a $3.5 million loan to refinance an existing loan that they had on a medical building.

In order to influence Malvern Federal’s actions, Bernadette Nicholas, Dennis Nicholas, and Rosen prepared and caused to be prepared fraudulent leases which misrepresented the potential rental flow income of their medical building and caused these leases to be submitted to Malvern Federal.  (usattyedpa21313)

MORAL

Notice how long the sentences are getting. Notice too, that the federal prosecutors went back to 2004 (nine year old loans) to get to them. The prosecutors are doing this nationwide and have been for some time.  They 10 ten years from when a loan closed to file criminal charges against the people involved, usually brokers and loan officers as here.

 

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

Comments (3)
Well, whereas I'd love to see the cfpb involved in the real estate shenanigans of one stop shopping at the real estate broker's office, the end result will be damaging to a consumer if they cannot be given a few names of reputable lenders to a buyer. They will be out on their own, often choosing the wrong lender for the wrong reasons. It will be deja vu most of the other cfpb rules, like longer and more confusing GFE. The only way for a real estate agent to feel safe will be to not refer anyone.
Posted by | Friday, March 01 2013 at 5:22PM ET
I have been in the business for 20 years and have never seen anything like this in my experience to many agency's to many rules and reg's that is a given the industry at it's core is very simplistic.

Addressing Realtor's and CFPB's close look if it walks like a duck and quacks like a duck it' more than likely is a duck the relationship between in house lending and the retail mortgage industry is and has been so corrupt it could be said that there is a plethora of collusive opportunity in any given deal that merits being held to the Highest Standard.

On that Note people that write and ultimately pass these regulations and rules should be required to not only Register with the NMLS they should also be subject to the same vetting that Originators must endure.

On the subject of rules and regulations it should be as simplistic as the Ten Commandments I think everyone knows how to read them and understands them and most Importantly how to apply them in everyday* life.

As it is now the sheer size and scope and the cost of enforcement is off the charts next there will Special Units that infiltrate Real Estate Offices small Independent Origination bases and Starbucks for morning coffee to make sure that nobody refers a friend to someone they know in the business.

Cash is King and where there is a deal to be made it will be done period
it's just that simple you cannot enforce that part of it I think for the most part the industry is solid there will always be the sensational are you that stupid story.

*Which brings us to last months Oscar for Stupid the Supreme Court Magistrate in Michigan yes this Judge committed fraud Real Estate and Document fraud.

NewsJet Magazine
Posted by Frank X. S | Saturday, March 02 2013 at 11:21AM ET
I have been in the business for 20 years and have never seen anything like this in my experience to many agency's to many rules and reg's that is a given the industry at it's core is very simplistic.

Addressing Realtor's and CFPB's close look if it walks like a duck and quacks like a duck it' more than likely is a duck the relationship between in house lending and the retail mortgage industry is and has been so corrupt it could be said that there is a plethora of collusive opportunity in any given deal that merits being held to the Highest Standard.

On that Note people that write and ultimately pass these regulations and rules should be required to not only Register with the NMLS they should also be subject to the same vetting that Originators must endure.

On the subject of rules and regulations it should be as simplistic as the Ten Commandments I think everyone knows how to read them and understands them and most Importantly how to apply them in everyday life life.*

As it is now the sheer size and scope and the cost of enforcement is off the charts next there will Special Units that infiltrate Real Estate Offices small Independent Origination bases and Starbucks for morning coffee to make sure that nobody refers a friend to someone they know in the business.

Cash is King and where there is a deal to be made it will be done period
it's just that simple you cannot enforce that part of it I think for the most part the industry is solid there will always be the sensational are you that stupid story.

*Which brings us to last months Oscar for Stupid the Supreme Court Magistrate in Michigan yes this Judge committed fraud Real Estate and Document fraud.

NewsJet Magazine
Posted by Frank X. S | Saturday, March 02 2013 at 11:24AM ET
Add Your Comments:
Not Registered?
You must be registered to post a comment. Click here to register.
Already registered? Log in here
Please note you must now log in with your email address and password.
Twitter
Facebook
LinkedIn
Already a subscriber? Log in here
Please note you must now log in with your email address and password.