Opinion

Variable Rate Disclosure Format to Change on Tila/Reg Z Disclosure

FACTS

The Federal Reserve Board is publishing an interim rule amending Regulation Z, which implements the Truth in Lending Act. This interim rule revises further certain requirements of the Mortgage Disclosure Improvement Act of 2008. The September 2010 interim rule requires creditors who extend consumer credit secured by real property or a dwelling to disclose summary information about interest rates and payment changes in a tabular format. The Board is issuing this interim rule to clarify certain provisions of the September 2010 interim rule. Specifically, this rule clarifies the requirements for adjustable-rate transactions that are “5/1 ARM” loans. It corrects the requirements for interest-only loans to clarify that the disclosures should reflect the date of the interest rate change rather than the date the first payment is due under the new rate.  This interim rule also revises the definition of “negative amortization loans” to clarify which transactions are covered by the special disclosure requirements for such loans.

This interim rule is effective Jan. 30. Compliance with its provisions is optional, however, for transactions for which an application for credit is received by the creditor before Oct. 1. (12 cfr 226.18)

MORAL

Make certain your document provider has the new format ready for you to use.

 

 

SOME OF THE CALIFORNIA NEW LAWS FOR 2011 THAT AFFECT YOU

FACTS

These new laws make it unlawful for a real estate broker to employ or compensate, directly or indirectly, any licensee for engaging in any activity for which a mortgage loan originator license endorsement is required if that licensee does not hold a mortgage loan originator license endorsement. It is a crime for a person to act as a mortgage loan originator without a license endorsement or to advertise using words indicating the person is a real estate salesperson or a mortgage loan originator without having a license or license endorsement. The commissioner may deny, suspend, revoke, restrict, condition, or decline to renew a mortgage loan originator license endorsement, or take other actions, after notice and opportunity for a hearing. 

Existing law requires a real estate broker who makes, arranges, or services loans secured by real property containing one to four residential units, and any real estate person who acts in a similar capacity under the supervision of the broker, to notify the Department of Real Estate within 30 days of commencing that activity. Existing law makes a real estate broker that fails to notify the department subject to specified penalties and authorizes the commissioner to suspend or revoke the license of the real estate broker.

These penalties now apply to a real estate salesperson who fails to notify the commissioner within 30 days of commencing those activities.

Existing law provides for the licensure and regulation of finance lenders and brokers, residential mortgage lenders and servicers, and mortgage loan originators by the Department of Corporations. The California Finance Lenders Law requires a licensed finance lender or broker employing one or more mortgage loan originators to continuously maintain a minimum net worth of $250,000.

Now a licensed finance lender or broker that employs one or more mortgage loan originators and that makes residential mortgage loans to continuously maintain that net worth of $250,000 and would require a licensed finance broker that employs one or more mortgage loan originators and that arranges, but does not make, residential mortgage loans, to continuously maintain a net worth of $50,000.

Existing law requires each finance lender and broker licensee to pay to the commissioner its pro rata share of all costs and expenses associated with the administration of the California Finance Lenders Law. Existing law requires the commissioner to notify a licensee, on or before the 30th day of November in each year, the amount levied against it for it’s pro rata share of those costs and requires a licensee to pay that amount by December 31.

Now the commissioner is to notify each finance lender and broker licensee by the 30th day of September in each year and would require a licensee to pay by October 31. Existing law requires each finance lender and broker licensee to maintain a surety bond in a minimum amount of $25,000. Existing law authorizes the commissioner to, by rule, require a higher bond amount for a licensee employing one or more mortgage loan originators.

Now the commissioner by rule may require a higher bond amount for a licensee who employs one or more mortgage loan originators and who makes or arranges residential mortgage loans.

The California Finance Lenders Law and the California Residential Mortgage Lending Act prohibit the commissioner from issuing a mortgage loan originator license unless the commissioner makes specified findings relating to the background, financial responsibility, and education of the applicant. Those laws also require a mortgage loan originator to comply with specified minimum standards by December 31 of each year and require a mortgage loan originator license to expire at midnight on January 31 if the licensee fails to satisfy those standards.

Now the commissioner is to deny an application for a mortgage loan originator license unless the commissioner makes those specified findings and would require the commissioner, before denying an application for licensure, to proceed pursuant to specified administrative hearing procedures.  A mortgage loan originator license will expire at midnight on December 31, instead of January 31, if a licensee fails to satisfy the minimum standards.

Existing law defines the term "brokerage services" for purposes of the California Residential Mortgage Lending Act.  A change now corrects an erroneous cross-reference in the provisions defining "brokerage services."

MORAL

Read these carefully.  They affect your ability to make a living and your ability to get and keep a license. Note the CFL only needs a $50,000 net worth if it is not funding the loans among other things.

 

NEW YORK MAN DRAWS 27 MONTHS IN PRISON FOR MORTGAGE FRAUD

FACTS

On Dec. 29, 2010 MICHAEL CASSADEI of Schenectady, N.Y., was sentenced to 27 months in prison for his role as organizer of a local Mortgage Fraud Scheme to be followed by three years’ supervised release. Cassadei also was ordered to make full restitution, due immediately, in the total amount of $135,148.45.

Cassadei owned, operated and/or did business in the name of, or using a number of entities, including AAA ALLSTATE APPRAISAL SERVICES. He pled guilty on Feb. 17, 2010, at which time he admitted that, through the use of fraudulent loan applications, settlement statements, appraisals and other false statements and documents, he and the other participants in the scheme were able to fraudulently cause First Union National Bank of Delaware to finance the sale of Capital Region residential properties in amounts well in excess of their actual value, and that he and other participants then used the proceeds of the loans to purchase the properties in much lower amounts and retained the bulk of the funds.

In furtherance of this scheme, Cassadei and the other participants coordinated two closings on the properties—in the first, the financial institution wired proceeds for the purchase of the properties for an amount substantially in excess of their true values. The mortgage amounts were inflated by, among other things, false seller-second mortgages and cash down payments or other payments or credits for the end buyers that did not, in truth and fact, exist. After paying the costs and fees associated with the initial closing, Cassadei then caused the remaining proceeds to be transferred to him or others acting under his direction. Thereafter, the deeds were recorded in reverse chronological order from that in which the sales actually occurred in order to create the appearance that the prior owners of the properties had conveyed them to the defendant and/or his nominees before sale to the end buyers, whereas the opposite was, in fact, what happened. As a result, the defendant was able to cause the bank, without its knowledge, to fund the purchase of the properties with the proceeds from their prior sale, with the bulk of the remaining funds going to the defendant or others at his direction.  (usattyndny122910)

MORAL

As I have repeatedly been saying, the federal prosecutors are getting tougher in their sentencing requests even when pleading guilty to the meltdown. If you have a good attorney he will do his best to negotiation and present a positive side to the judge for sentencing purposes. Remember, he will submit it in writing so it will be remembered during sentencing.

 

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.
Compliance Law and regulation
MORE FROM NATIONAL MORTGAGE NEWS