Opinion

Comp Payment Record Keeping Reminder

 

CFPB REMINDER ABOUT RECORD KEEPING OF COMPENSATION PAYMENTS

FACTS

The Consumer Financial Protection Bureau requires a creditor to maintain records sufficient to evidence all compensation it pays to a loan originator, as well as the compensation agreements that govern those payments, for three years after the date of the payments.

Additionally a loan originator organization must maintain records sufficient to evidence all compensation it receives from a creditor, a consumer, or another person and all compensation it pays to any individual loan originators, as well as the compensation agreements that govern those payments or receipts, for three years after the date of the receipts or payments.  (12.cfr Section 1026.25(c)(2)(i))

MORAL

This rule allows the CFPB examiners an easy way to trace the funds without having to dig through papers. They can find the from your records the payment on each loan to the loan originator if it is retail along with the agreement and more importantly, the payment on each loan from the creditor to the mortgage broker to the loan originator in one log, making it that much easier to trace overpayments, charges and violations of the 3% rule. 

A REMINDER ABOUT DISPARATE IMPACT

FACTS

Disparate impact theory allows the government or private litigants to bring discrimination claims based solely on statistics that show an otherwise neutral policy has a disparate impact on protected classes without having to show intent to discriminate.

Although the disparate impact theory is used primarily to bring housing discrimination cases under the Fair Housing Act which prohibits discrimination in housing on the basis of color, religion, sex, familial status and national origin, it could conceivably be used to challenge insurance risk classifications that have a disparate impact on a protected class. Courts have found that homeowners insurance is essential to obtaining a mortgage and, therefore, is subject to the FHA.

MORAL

As a reminder, it has been found that only doing qualified mortgages does not in and of itself violate the Equal Credit Opportunity Act.  However, does that hold true for the disparate impact rule? Interesting question, is it not?

A REMINDER ABOUT THE RESPA ANTI-KICKBACK RULE AS INTERPRETED BY CFPB

FACTS

In a transaction involving federally related mortgage loan, compensation of a real estate broker or agent for marketing services that are directed to particular homebuyers or sellers could easily be a payment that violates Section 8 of the Real Estate Settlement Procedures Act as an illegal kickback for a referral of settlement service business. For example, a real estate broker or agent actively promoting a particular loan originator or lender and its products to sellers or prospective homebuyers by providing loan services using ‘‘sales pitches’’ about the benefits of a particular MLO or Lender by distributing the promotional material at the broker’s or agent’s office or at an open house is considered to be a referral.  Compensating the real estate broker or agent for such promotion would result in a violation of section 8 of RESPA.

Nothing stops a real estate broker or agent from performing services to aid the seller or buyer, or to increase the possibility that the real estate transaction will occur which will benefit the broker or agent. However, the broker or agent may not be compensated for marketing services directed to particular homebuyers or sellers. (See 24 CFR 3500.14(g)(2).) (75fr36271-2010))

MORAL

There are legal ways to get someplace that you want to go. But exceeding guidelines can create RESPA issues that can cost you tremendously as they did one builder. We do have ideas that we are of the opinion will comply with RESPA. If you have questions contact us. 

ILLINOIS SEES NINE INCLUDING TWO LAWYERS INDICTED FOR MORTGAGE FRAUD

FACTS

On Nov. 27, a couple who owned a now-defunct suburban title company, a disbarred attorney and an attorney are among nine defendants who have been indicted in two separate mortgage fraud cases. Seven defendants were charged together in one case, and two in the second case, together alleging schemes to fraudulently obtain at least four residential mortgage loans totaling more than $1 million from lenders.

Both indictments allege that the mortgages were obtained to finance the purchase of properties using fraudulent means including straw buyers, short sales, inflated prices and unqualified borrowers. As a result, the lenders incurred losses because the mortgages were not fully recovered through subsequent sale or foreclosure.  Seven of the defendants were charged in an indictment that was unsealed on Nov. 25, including disbarred attorney Harvey Wright and Precious House. Others indicted are David Guel and his wife Mary Gleason; Muntazer Ali Saiyed; Saged Ansari and Azeem Syed. All seven were charged with two counts of wire fraud and House, Syed, Saiyed, and Ansari were also charged with one count each of identity theft.

Guel and Gleason owned and operated the former U.S. Worldwide Title Services LLC.

All seven defendants pleaded not guilty in U.S. District Court and were released on bond. A status hearing was scheduled for Jan. 13.

According to the indictment, between September 2008 and March 2009, the defendants caused two fraudulent mortgage loans to be issued by lenders. The alleged fraud involved false representations in documents, including real estate contracts, loan applications, title commitments, and HUD-1 settlement statements concerning sales prices, the true disbursement of the loan proceeds at closing, the buyer’s assets, employment, and income.

The defendants allegedly used straw buyers who had no intention of residing in the property and making mortgage payments, as well as stolen identities of individuals who did not know that their identities were being used to purchase property. Guel, Gleason, Wright, and House allegedly conducted “double closings” where a property was sold to a buyer, who only temporarily took ownership before immediately re-selling to a second buyer at an inflated sales price using a fraudulently obtained mortgage to finance the purchase.

House allegedly facilitated the double closings by recruiting individuals to pose as the first and second buyers and arranging for them to use stolen identities provided by Syed, Saiyed, and Ansari, in connection with the transactions, the indictment alleges.

Guel, Gleason, and Wright allegedly prepared fraudulent documents stating that the properties had been transferred into a trust approximately a year before the double closing to conceal from the lender that the property was being sold twice, including on the same day. These three defendants and House allegedly obtained loan proceeds for their own personal benefit.

In an unrelated case, George Kouvelis, who bought and sold residential properties, and Karim Dure, an attorney, were each charged with two counts of wire fraud in an indictment that was unsealed on Nov. 14 after Kouvelis was arrested. Kouvelis and Dure, who was not arrested, both pleaded not guilty and were released on bond. Their next court date is Jan. 6. The indictment seeks forfeiture of $521,250.

According to the indictment, between November 2008 and March 2009, Kouvelis and Dure caused a buyer to obtain two fraudulent mortgage loans to purchase Kouvelis’ properties at 5804 South Princeton Ave., and 5563 South Shields Ave. The defendants allegedly made false representations in documents, including real estate contracts, loan applications, and HUD-1 settlement statements concerning inflated sales prices, money paid to the buyer for purchasing the properties, the buyer’s assets, liabilities, and source of down payment.

The indictment alleges that Kouvelis fraudulently obtained mortgage loan proceeds through false closing documents, which concealed that the buyer was being paid to purchase the properties; concealed that the funds being used for down payments were provided by another individual; inflated purchase prices; and concealed that the buyer was contributing little or no equity to the transactions. Dure allegedly represented the buyer knowing that the loans were being funded based on false information about the buyer’s qualifications, including a will submitted by the buyer and a letter that Dure submitted to the lender verifying that the buyer had received $200,000 from his grandfather’s estate.

Each count of wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. The identity theft count against defendants House, Syed, Saiyed, and Ansari carries a maximum of 15 years in prison and a $250,000 fine. If convicted, the Court may impose an alternate fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater. (usattyndilo112713)

MORAL

Illinois is a breeding ground for mortgage fraud prosecution lately. But do remember, the federal prosecutor has 10 years from the loan to file a criminal case and here they did it in five years.

FAKE A SHORT SALE IN NEVADA AND GO TO FEDERAL PRISON

FACTS

On Nov. 26, Cynthia and Robert Hosbrook, a husband and wife real estate agent team pleaded guilty to bank fraud in connection with a series of short sale fraud schemes. They face up to 30 years in prison and a fine of up to $1 million.

In 2010, the Hosbrooks engaged in a short-sale fraud scheme to sell their personal home to Cynthia Hosbrook’s mother. They then defrauded Wells Fargo Bank and Freddie Mac by falsely claiming that the sale was due to personal hardship and that the buyer was not a family member. They completed the sale and lived in the home even though they had not suffered any hardship. The scheme resulted in a loss of more than $170,000 for Wells Fargo and Freddie Mac.

The Hosbrooks also were involved in two other short-sale fraud incidents in 2008 and 2009. Their three transactions resulted in over $350,000 in total losses for Wells Fargo and Freddie Mac.  (lasvgsn112613)

MORAL

Anyone out there thinking of faking a short sale? Did anyone out there sell their home to a family member or friend in a short sale? You may want to talk to us now rather than later.

 

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

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