Editor's note: This post has been updated to clarify the author's basis for inferring that First Alliance has been giving the CFPB "leads" on other companies violating RESPA, an interpretation the company disputes.
CALIFORNIA MAN GETS NEARLY 18 YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD
On Feb. 24, Carl Cole was sentenced to almost 18 years in a federal prison for his role in a $30 million mortgage fraud scheme in Bakersfield. Cole had previously pleaded guilty to conspiracy to commit mail fraud, wire fraud and bank fraud.
After his sentencing he was immediately taken into custody.
On the same day his son Caleb was sentenced to six months in prison after a guilty plea to charges of mail fraud. Caleb Cole will not have to report to prison until April 21. (bkrsfldcas22414)
And so ends a saga that has been going on for over six years since the investigation began.
CFPB ORDERS FIRST ALLIANCE LENDING TO PAY PENALTY FOR RESPA KICKBACK
On Feb. 24, the Consumer Financial Protection Bureau ordered Connecticut-based mortgage lender First Alliance Lending to pay an $83,000 civil money penalty for violating federal law by illegally splitting real estate settlement fees. First Alliance self-reported these violations to the Bureau, admitted liability, and, according to the CFPB's press release issued that day, "provided information related to the conduct of other actors that has facilitated other enforcement investigations."
Director Richard Cordray stated the CFPB will continue to take into account the self-reporting and cooperation of companies in determining how to resolve such matters.
First Alliance is a mortgage lender in East Hartford, Conn. that focuses primarily on providing loss-mitigation financing to distressed borrowers. First Alliance obtains troubled mortgages from mortgage servicers, and reaches out to consumers to offer them new loans with reduced principal amounts under federally related mortgage programs.
First Alliance started using a hedge fund to finance its loans in 2010. Under this arrangement, First Alliance split revenues and fees with affiliates of the hedge fund. In 2011, First Alliance secured less costly financing and ended its arrangement with the hedge fund and its affiliates. Although the hedge fund and its affiliates no longer financed First Alliance’s mortgages, First Alliance continued to split origination and loss-mitigation fees with them. The hedge-fund affiliates received payments from 83 First Alliance loans made between August 2011 and April 2012.
In 2013, First Alliance reported to the Bureau that it believed it had violated the Real Estate Settlement Procedures Act by paying these unearned fees. RESPA bans a person from paying or receiving a portion or split of a fee that has not been earned in connection with a real estate settlement. First Alliance cooperated with the Bureau's investigation, and the Bureau concluded that First Alliance's payments to the hedge fund and its affiliates had violated RESPA. First Alliance's self-reporting and cooperation, consistent with the Bureau’s Responsible Business Conduct bulletin published on June 25, 2013, were taken into account in resolving this matter.
Under the terms of the consent order, First Alliance is required to pay a civil money penalty of $83,000 to the Bureau and agrees not to violate RESPA in the future. The Bureau will continue to enforce RESPA's provisions to protect consumers and to deter unlawful activity. (cfpb22714)
From the CFPB's press release, it sounds like First Alliance gave "leads" to CFPB of others violating RESPA. However, a company spokesman says it "never gave the CFPB any information other than what was related to the other party who was involved in the matter," i.e. the hedge fund. If any other parties were affected, they'll find out soon enough.
CALIFORNIA WOMAN GOES TO JAIL FOR MORTGAGE FRAUD
On Feb. 27, Gloria Becerra was sentenced to a year in jail after pleading guilty to charges of felony fraud, grand theft and recording a false document. In my opinion she had a sharp attorney when she paid $60,000 in restitution before being sentenced which will be given to the victims. That goes a long way with a judge when the judge is considering how long a person should stay in custody.
Becerra was a local representative for a loan modification and foreclosure rescue business, Sunset Beach Management.
Law enforcement shut down the operation in 2010 but Becerra continued to operate under other business names, including Financial Wellness for Homeowners L.A., California Sky Premier, Sunrise Financial I, Dream Care Holding and Secured Assets Group LLC.
Becerra pleaded guilty to five counts of felony grand theft, two counts of felony foreclosure consultant fraud and one felony count of recording a false instrument. She also admitted to a special allegation of taking money in excess of $65,000.
Becerra collected about $78,000 in illegal upfront fees from victims and promised to reduce their mortgage loans and "save" their homes from foreclosure. (vntrastr22714)
As I said the prosecutors are still pursuing fraudulent mortgage loans that funded as long as 10 years ago. Here it was loan modification. Remember fraud includes NINA and SISA loans. If a loan officer did not get some validation and in fact had reason to know the information was fraud they to can be and have been prosecuted. Offhand it would appear Becerra had a good attorney since she was only sentenced to one year. In the federal system it could have been a lot longer. Both state and federal agencies are still pursuing mortgage fraud and loan modification cases very aggressively because of the meltdown and in this lawyer’s opinion.
SEVEN ARRESTED IN SAN BERNARDINO COUNTY FOR LOAN MODIFICATION FRAUD
On Feb. 26, seven suspects were arrested and charged in a scheme that defrauded more than 1,550 Inland Valley homeowners seeking loan modification services during California’s foreclosure crisis.
The felony complaint alleges that Nehad "Nick" Ayyoub, president of The Firm Loans, Insurance and Investments Inc. and First Choice Debt Solutions Inc. along with his six colleagues, Ghydan Rabadi, Zaid Rabadi, James Clemons, Wissam Ismail, Eddie Mercado and Majid Safaie, deceived homeowners by illegally charging up-front payments for loan modification services and lying about the services they provided.