Compliance & Regulation

From industry insiders to straw buyers, nearly 500 people have been arrested in a nationwide mortgage fraud takedown that reflects the coordinated efforts of law enforcement to address the growing problem of crime in the housing industry.

"Mortgage fraud ruins lives, destroys families, and devastates whole communities," Attorney General Eric Holder said recently at a press conference to discuss the results of "Operation Stolen Dreams." Launched on March 1, 2010, the multi-agency initiative has led to a total of 485 arrests. More than 330 convictions have been obtained, and nearly $11 million has been recovered. Losses from a variety of fraud schemes are estimated to exceed $2 billion.

An FBI special agent describes some common mortgage fraud scams.

- Application Fraud

U.S. District Judge J. Frederick Motz has sentenced Timothy Reed, 45, of Beltsville, Maryland, to 51 months in prison followed by five years of supervised release for mail fraud arising from the fraudulent purchase of 25 properties in Maryland, the District of Columbia, and Virginia using false mortgage and settlement documents. Judge Motz also ordered that Reed pay $4,196,967 in restitution.

According to Reed’s plea agreement, Reed and others allegedly paid over 15 straw purchasers $10,000 per property to purchase houses for Reed and others. Reed created false mortgage and settlement documents, many of which misrepresented the straw purchasers’ income and assets. Reed and others also created false invoices to claim that their company, Brotherly Investment Group, performed “renovations” on some of the properties. Using these false invoices, Reed and others were “repaid” at closing for the purported renovations. Reed was an organizer and leader in this scheme.

From 2006 to 2008, Reed and others received approximately $3,830,418 in fraudulent funds as part of this scheme. Many of the purchased properties have been foreclosed upon.

President Obama Wednesday morning signed the Dodd-Frank Wall Street Reform bill, which will transform the regulation of financial services and the mortgage industry over the next three years as new rules are issued and implemented.

The CEO of the nation's independent mortgage company is urging federal and state regulators to extend an August 1 deadline for loan officer licensing approvals due to processing delays at state agencies.

Countrywide Financial Corp. gave 'Friends of Angelo' loans with preferential terms to roughly three dozen employees of Fannie Mae, according to newly released documents.

An explicit government guarantee and insurance wrap on mortgage-backed securities are among a gathering consensus about Fannie Mae/Freddie Mac reform that is emerging in one of the two main political camps debating the issue.

A new government report says delinquencies on permanent HAMP loan modifications that are six months old are much lower than servicers' proprietary loan modification programs.

The financial reform bill protects consumers from the home-lending abuses that led to thousands of foreclosures in Silicon Valley by establishing the Bureau of Consumer Financial Protection. The provisions establishing the Bureau grant the Bureau rule making authority and provide the Bureau with supervisory authority over nondepository-covered persons. This includes any person that engages in offering or providing a consumer financial product or service and any affiliate of such person if the affiliate acts as a service provider to such person.

Housing and residential finance trade groups expect to launch a major lobbying effort with the goal of getting the Senate to take up and pass a Federal Housing Administration reform bill this year.

Now that congress has passed the Dodd-Frank Wall Street Reform bill, attention has quickly turned to the implementation date of the regulatory provisions, which impact every mortgage securitizer, lender, servicer and loan broker.Not only are questions popping up about effective dates, but how long it will take to get the new Consumer Financial Protection Bureau up and running. Sen. Jack Reed, D-R.I., told reporters that Congress needs to focus "relentlessly" on the regulatory process. "I would urge my colleagues beginning probably no later than September to hold hearings on the status of the regulations."