Get Ready for Disparate Impact

FEB 14, 2013 5:25pm ET
Comment (1)

On Feb. 1, Justin H. Knight was sentenced by U.S. District Court Judge Robert E. Blackburn to serve five years’ probation, with the first 12 months in home detention for shredding documents in an attempt to obstruct an investigation into a mortgage fraud scheme.

Knight pled guilty to destruction of records on Feb. 10, 2012. In connection with a larger mortgage fraud scheme, Peter V. Capra, Demetrious G. Gianopoulos and Brian Waring were charged in three separate indictments.

Gianopoulos pled guilty to one count of money laundering on May 10, 2011, and was sentenced to serve five years’ probation. Warning pled guilty to one count of conspiracy to commit mail fraud, wire fraud, and money laundering and is expected to be sentenced later this year. Capra was indicted on April 25, 2012, which was then followed by a superseding indictment on May 23, 2012, for obstruction of justice, mail fraud, wire fraud, and money laundering. The Capra case is currently scheduled for trial on Sept. 23, in front of Judge R. Brooke Jackson. Capra was president of Golden Design Group Inc., a home builder.

On April 10, 2007, a grand jury subpoena was served on GDG, for whom Knight worked for at the time. After a meeting with Capra, Knight and another GDG employee began shredding documents allegedly based on instructions from Capra. The shredding was accomplished using a new, high-volume shredder purchased by Capra for this task. Documents that were shredded included sales contracts between GDG and various other people involved in the mortgage fraud scheme.

If convicted, Capra faces not more than 10 years in federal prison and up to a $250,000 fine for obstruction of justice. He faces not more 20 years in federal prison and up to a $250,000 fine, or two times the gain or loss from the offense, for each of the 14 counts of wire fraud and for each of the two counts of mail fraud. Capra faces not more than 10 years in federal prison and up to a $250,000 fine, or the value of the property involved in the transaction, or both, for each of the 10 counts of money laundering. (usattyco2413)


Old rule that is tried and true. When someone says if you were my friend you would do it, the answer is that if you were my friend you would not ask.



The Virginia Bureau of Financial Institutions has amended regulations applicable to mortgage lenders, effective Jan. 28. Among the changes is a requirement that lenders may only use mortgage loan originators who are licensed, sponsored by such lender in the Nationwide Mortgage Licensing System, and are employees or exclusive agents of such lender. Loan processors and underwriters do not need to be licensed, provided they do not take loan applications or counsel consumers regarding loan terms. Loan processing and underwriting functions may be outsourced pursuant to conditions set forth in the amended regulations

Chapter 160 of Title 10 of the Virginia Administrative Code is amended as follows:

· Any person who is engaged solely in the business of a loan processor or underwriter is now expressly carved out from the definition of a “mortgage broker.” As a result, the regulations make clear that these individuals are not subject to licensure. Loan processors or underwriters may receive, collect, distribute, and analyze information common for loan processing or underwriting and may communicate with consumers to obtain such information, so long as they do not take loan applications or otherwise communicate with consumers about a prospective loan before the consumer has submitted a loan application. They also may not counsel consumers about loan terms.

· A licensee may outsource its loan processing or underwriting activities to a third party loan processor or underwriter, pursuant to a written agreement with the third party that obligates the third party to comply with applicable law and submit to examinations of its business by the Virginia regulator. The third party may not subcontract the services it performs for a licensee to any person other than its employees.

· The term “refinancing” is now defined in the regulations to mean an exchange of old debt for new debt, including through negotiating a different interest rate or term, and expressly including any loan modification. As such, loan modifications are subject to Virginia’s advertising restriction that requires lenders offering loan refinancing to disclose to consumers when the total finance charges may be higher over the life of the refinanced loan.

· Licensees are expressly prohibited from making any false, deceptive, or misleading statement to consumers.

· Licensees are obligated to file a report to the state regulator within 15 days of becoming aware that the licensee or any of its employees, officers, directors, principals, or exclusive agents is convicted of a misdemeanor involving fraud, misrepresentation, or deceit. Previously this requirement only applied to felonies and did not encompass an exclusive agent of the licensee.

· Licensees must only use mortgage loan originators who are licensed and sponsored by the licensee in NMLS. Such individuals must be an employee or an exclusive agent of the licensee and must be covered by the licensee's surety bond.  (Compliments Weiner, Brodsky)


0ver 3,000 pages from CFPB as of Jan. 10 and do not forget the states amending and their regulations. Makes you realize how valuable a knowledgeable lawyer is to protect your license and livelihood.



Comments (1)
Regarding the FHA commentary. The moral is: This is what happens when a builder is allowed to own and operate a mtg banking co. The big builders were huge cause of the crash and crisis. Whole subdivisions sold on crap.
Builder builds and sells house and provides financing. Builder does not have a clue, just wants loans closed. Makes money 3 ways. Very strong conflict of interest. BUILDERS AND RE COMPANIES SHOULD NOT BE ALLOWED TO OWN AND OPERATE MTG COMPANIES.
Posted by KARIN B | Tuesday, February 19 2013 at 2:24PM ET
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