Opinion

New Regulations From Washington

CFPB BACKS OFF ON ZERO POINTS ZERO FEES LOANS

FACTS

In August 2012 the Consumer Financial Protection Bureau proposed a rule requiring mortgage loan originators to offer a loan without any upfront origination charges whenever they were offering a loan with upfront origination charges. Based on the comments received, it decided not to finalize this part of the proposal(cfpb11813)

MORAL

That is a good way to develop laws and rules. First propose the law and rule and then later decide if it will work rather than investigate it first. What was it Shakespeare said about “all the lawyers?” Should it apply to all the rule makers?

CIVIL MONEY PENALTIES GO UP IF VIOLATE FEDERAL AGENCY LAWS

FACTS

This final rule increases the amount of civil money penalties for various violations of agency regulations and rules including but not limited to HUD, FHA and sponsored third party originators.

The maximum penalties for making a false claim or written statement as described in the regulation, is increased to $8,500.

The maximum penalties that the Mortgagee Review Board may impose for a series of violations identified in the regulations are increased to $8,500 per violation, and to $1,525,000 for all violations committed during any one-year period.

The maximum penalty that HUD may impose upon participants in FHA programs for violations identified in the regulation is increased to $7,050, and maximum of $1,335,000 for all violations committed during any one-year period.

The maximum penalty that HUD may impose upon a mortgagee or a holder of a guarantee certificate that violates the statutory provisions concerning loan guarantees for Indian housing is $8,000 per violation, and $1,525,000 for all violations committed during any one-year period.

The maximum penalty that may be imposed upon a mortgagor of a multifamily property or upon any person in a relationship with the mortgagor, as described in the regulations, is increased $42,500 per violation.

The maximum penalty that may be imposed against a Ginnie Mae issuer or custodian for a violation of any provision of 12 U.S.C. 1723i(b) or other authorities cited in the regulations is $8,500 per violation, and $1,525,000 for all violations committed during any one-year period.

The maximum penalty that HUD may impose upon any dealer or sponsored third party originator for, among other things, falsifying statements or making false representations in violation of section 2(b)(7) of the National Housing Act (12 U.S.C. 1703(b)(7)) is $8,500 for each violation, and $1,525,000 during any one-year period.

The maximum penalty that may be imposed against any owner, any general partner of a partnership owner, or any agent, as described in the regulation, that provides a knowing and material breach of a housing assistance payments contract, is $27,500 per violation.

The maximum penalties that the Administrative Law Judge may impose upon a respondent who is found to have engaged in a discriminatory housing practice is increased to $42,500, and to $70,000, respectively. (78 FR 4057-1/118/03)

MORAL

Now you know why you retain us, to avoid and or minimize the penalties and keep you out of the loop where possible. I would like the sponsored third party originators to note that though they no longer are “approved mortgagees” of HUD they are still subject to jurisdiction of HUD for disciplinary and penalty purposes.

FHA ANNUAL CERTIFICATION AND HOW TO LOSE YOUR LEGAL LICENSE AND DIRECT ENDORSEMENT APPROVAL

FACTS

Each year an FHA-approved mortgagee’s principal, chief executive or in-house general counsel signs an attestation as part of the Federal Housing Administration’s annual certification process that accompanies payment of the mortgagee’s yearly verification fees. Sometimes without thinking, the executive or in-house counsel then attests that the company complies with all HUD-FHA regulations and no state or federal agency lifted its license during the past year.

The attestation is quite serious. FHA-approved mortgagees have been finding themselves charged before the HUD Mortgagee Review Board and the primary executives threatened with debarment proceedings for failing to read the fine print. The Online Annual Recertification Attestation does state that the mortgagee has complied with and agrees to comply with all HUD regulations, handbooks, Mortgagee Letters, policies and other federal laws and regulations. No mortgagee, its principals, officers, managers and employees shall be subject to “unresolved findings: as a result of a HUD or other government audit, investigation or review.

Mortgagee Letter 2010-38 defines the term “unresolved findings.” The definition includes unresolved lawsuits resulting from government investigations at the state and federal level as well as allegations of ongoing patterns and practices of violations or findings of discrimination. The definition includes open issues on any audit, investigation or review, and any imposition of fines, settlement agreements or other monetary sanctions by a state or local entity or any other action by a government agency. If you forget to notify HUD that some loan officers were disciplined because of soliciting loans before they were licensed, then the company’s principal may have signed a false certification without knowing of the false statement when executing the FHA Online Annual Recertification Attestation. Even routine annual state audits that are presently ongoing are considered unresolved findings  

Remember, after signing a consent order or other agreement with a state or federal agency (including HUD), report the matter in writing to the Director of HUD’s Approval and Recertification Division. If your company is the subject of any ongoing state or federal audit, investigation or review, it should not sign a certification that implies the company has no ‘unresolved findings’ without first consulting competent legal counsel.  A lender should probably inform HUD that it is “unable to certify: and explain why. HUD has formed a committee to review the information. In most cases HUD approves the mortgagee for participation.

Take your time to read that Online Annual Recertification Attestation and check your loan officer licenses and NMLS status before signing.  After signing it becomes a little bit late to avoid an investigation, especially when all the matters are public record. Compliments of KL&G

MORAL

Like the borrower, read before you sign. Especially when checking out your net worth.

CALIFORNIA COUPLE ARRESTED FOR FORECLOSURE FRAUD INVOLVING THEIR OWN HOME

FACTS

Blas and Nancy Arreola of Turlock, Calif., face felony charges of trying to stall foreclosure of their property by filing phony documents with the county recorder, similar to cases filed in December 2012 against four other homeowners. The charges include multiple counts of identity theft, recording false or forged documents, and fraud conspiracy. Court documents suggest that authorities may go after supposed masterminds accused of running a fraud scheme from Southern California.

They were allegedly taught by Jacob and Aide Orona of Highland in San Bernardino County, according to an arrest warrant affidavit for the Arreolas filed by investigator Glenn Gulley of the district attorney's office. (modb12113)

MORAL

It seems so justifiable, until you get indicted.

MARYLAND TITLE COMPANY OWNER GETS TWO YEARS IN FEDERAL PRISON

FACTS

Harriet M. Taylor was sentenced to two years in prison followed by five years of supervised release for wire fraud in connection with a scheme to use over $1.5 million in mortgage closing funds for her personal use and to operate her title companies. Judge Quarles also ordered Taylor to pay restitution of $1,256,635.70 to Old Republic and $253,750.84 to CAN Surety, the insurer on Taylor’s errors and omissions policies.

Taylor co-owned and managed two title insurance companies, Regal Title Co. LLC and Loyalty Title Co. LLC. Pursuant to an agreement with a national title insurance underwriter, and as required by Maryland state law, escrow accounts for Regal and Loyalty were established, separate from company operating accounts, for the purpose of holding and disbursing funds received from lenders for real estate closings.

Beginning in 2009, however, Taylor caused some mortgage lenders to wire their funds entrusted for real estate settlements to Regal’s operating account, rather than to the escrow accounts. Taylor also caused funds in Regal’s and Loyalty’s escrow accounts to be transferred back and forth to the companies’ respective operating accounts. By using commingled funds throughout 2009, Taylor kept her two businesses afloat while enriching herself with both company and escrow funds. From January through December 2009, Taylor paid herself $477,877.50 from three company operating accounts.

As shortfalls in the escrow accounts increased, Taylor failed to remit insurance premiums to the title insurance underwriter, Old Republic National Title Insurance Co.; pay recording fees for deeds; and pay off prior liens, including four of which belonged to the government sponsored entities, Fannie Mae and Freddie Mac.

Old Republic learned of the commingling of escrow and operating funds during a 2009 audit of Regal. They directed Taylor to stop the practice. Five months later during a further audit of both companies, Old Republic discovered that in nine cases Taylor used the payoff checks that were supposed to pay prior lien holders and immediately terminated her as an agent. Old Republic was obligated to satisfy the prior liens against the properties affected by the misuse of settlement funds and to complete other transactions Regal and Loyalty failed to perform. Accordingly, in January 2010, Old Republic incurred a total loss of $1,518,532, which resulted from paying off prior liens, paying recording fees, and for insurance premiums collected by Regal and Loyalty but not forwarded to Old Republic.  (usattymd11713)

MORAL

Remember when I said be careful of the title company you choose?  Looks like people chose these two and one other from a prior report that should have been passed over.

 

THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.

AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.

 

 

For reprint and licensing requests for this article, click here.
Secondary markets Law and regulation Originations Servicing Compliance
MORE FROM NATIONAL MORTGAGE NEWS