JUL 12, 2013
Compliance Matters

Mortgage Company Fined $7.5 M by FTC

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 VIOLATE THE “DO NOT CALL LIST” AND THE FTC WILL FINE YOU $7.5 MILLION AND HAVE THE COURT ISSUE OTHER DRACONIAN ORDERS

FACTS

Mortgage Investors Corp., St. Petersburg, Fla., a mortgage company that contacted people on registered “Do Not Call” lists, has been fined $7.5 million by the Federal Trade Commission. The company has entered into a stipulated judgment.

It was a leading refinancer of veterans’ home loans, according to the FTC. This will be the largest fine and civil penalty ever charged by the FTC.

Mortgage Investors violated the FTC’s Do Not Call provisions of the Telemarketing Sales rule. According to the complaint, Mortgage Investors’ telemarketers called more than 5.4 million numbers listed on the National Do Not Call Registry to offer home loan refinancing services to current and former U.S. military consumers in violation of the TSR Rule. 

 The telemarketers also allegedly led service members to believe that low interest, fixed rate mortgages were available at no cost, often quoting rates that they implied would last the duration of their loan. In reality, Mortgage Investors only offered adjustable rate mortgages in which consumers’ payments would increase with rising interest rates and would require consumers to pay closing costs. 

In addition, Mortgage Investors allegedly misled consumers about their affiliation with the Department of Veterans Affairs. The FTC charged Mortgage Investors with false and misleading acts or practices in violation of Section 5 of the FTC Act and the MAP Rule.

The civil charges also represent the first time the FTC has ever enforced the Mortgage Acts and Practices – Advertising rule (MAP), which allows the FTC to collect civil penalties for deceptive mortgage ads.

In doing this there is a stipulated order that contains some draconian requirements.

For five years after entry of the order, the company must deliver a copy of this order to: (1) all principals, officers, directors, and managers and members; (2) all employees, agents, and representatives who participate in the telemarketing, advertising, marketing, promoting, offering for sale, or selling of any mortgage credit product; and 3) any business entity resulting from any change in structure of the entity.

One year later, the company must submit a compliance report, sworn under penalty of perjury. It must describe in detail whether and how the company is in compliance with each section of this order.

For a 10 year period, Mortgage Investors must submit a compliance notice, sworn under penalty of perjury, within 30 days of any change in any designated point of contact and company.

It must create certain records for 10 years after entry of the order, and retain each such record for five years. These include:

A. Accounting records showing the revenues from all goods or services sold, all costs incurred in generating those revenues, and the resulting net profit or loss;

B. Personnel records showing, for each person providing services, whether as an employee or otherwise, that person's: name; addresses; telephone numbers; job title or position; dates of service; and (if applicable) the reason for termination;

C. Records of all consumer complaints, whether received directly or indirectly, such as through a third party, and any response;

D. All records necessary to demonstrate full compliance with each provision of this order, including all submissions to the Commission; and

E. A master copy of each unique Commercial Communication relating to Mortgage Credit Products. (U.S. v. Mortgage Investors Corporation of Ohio, Inc., Matter No. 1223084.June 25, 2013)

MORAL

Now you understand why it is less expensive to see your attorney first.

FANNIE MAE DEFINITION OF QUALIFIED MORTGAGE EFFECTIVE JAN. 14, 2014

MORAL

What does this mean to the lender and the broker? Each of you has signed lender broker agreements and wholesale loan agreements. You will find if you have not already, that you gave Fannie Mae and the lender if you are a broker an absolute guarantee of total compliance, which includes Dodd-Frank. That means if there is a discovery at some point the loan does not comply with Dodd-Frank after the various effective dates, especially after Jan. 10, 2014, you are looking at buying the loan back if a lender or purchasing it from the broker and/or indemnifying the lender against any loss and I do mean ANY.

CEO OF A CALIFORNIA MORTGAGE COMPANY SENTENCED TO OVER THREE YEARS IN FEDERAL PRISON

FACTS

On July 1, David Lee Hardin, CEO and majority shareholder of a group of companies including Covenant Mortgage, was sentenced to 41 months in prison for running a Ponzi scheme that collected more than $6.7 million from more than two dozen victims.

From April 2007 through July 2010, Hardin solicited investments in a side venture related to his mortgage business. The investments were structured as loans to Hardin’s companies at fixed rates of interest. Hardin told the investors that their funds would be used to finance a home building project, to originate mortgages, and to fund his debt settlement business and that returns would be generated through home sales and fees from mortgage originations and debt settlement services. In reality, Hardin used a large percentage of the funds to make purported “interest” payments to earlier rounds of investors, in the typical pattern of a Ponzi scheme. He used other funds for personal expenses, including rent and car payments. Still other funds were used for operational costs of Hardin’s other businesses, including employee salaries and operating costs. (usattyla7113)

MORAL

If you are soliciting investors, make sure you comply with BRE, DBO and SEC or you to might meet the FBI. Don’t you just love all the initials?

LORRAINE BROWN, A FORMER EXECUTIVE WITH LENDER PROCESSING SERVICES, GETS FIVE YEARS IN PRISON

MORAL

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