Compliance & Regulation

Patrick M. Singletary, Robert D. Singletary and Peter J. Russo, all from Jacksonville, Florida, have been sentenced on charges related to a mortgage scheme to defraud the Federal Housing Administration of $2.5 million. Patrick Singletary was sentenced to 18 months in federal prison and ordered to forfeit $1 million. Robert Singletary and Peter Russo were each sentenced to serve one year in federal prison. Robert Singletary was ordered to forfeit $1 million and Russo was ordered to forfeit $500,000. All three defendants had pleaded guilty in October 2008. According to court documents, the defendants submitted false documentation to obtain FHA-insured loans for buyers of single-family properties in Jacksonville between 1997 and September 2004.

Freddie Mac priced a new $4.5 billion five-year Reference Notes security at 99.781 to yield 2.547%, or 65 basis points more than five-year U.S. Treasury notes. The company had delayed the deal (CUSIP number 3137EACB3) a day in response to the death of its chief financial officer. The transaction was offered via a syndicate of dealers headed by Deutsche Bank Securities Inc., Goldman Sachs Group and Morgan Stanley.

New homes sales edged down 0.6% in March as an upward revision in the February report by 21,000 sales points to a market that may be finally bottoming out.The U.S. Census Bureau reported that sales of new single-family homes fell from a seasonally adjusted annual rate of 358,000 in February to 356,000 in March. The bureau originally reported 337,000 sales in February. Economists are expecting to see a bottom in home sales soon. In a speech on Monday (April 20) Federal Reserve governor Donald Kohn said "recent data suggest that the multi-year contraction in home sales and new construction may be nearing an end." He noted, however, that house prices will continue to fall for a while due to the large inventory of unsold homes on the market. Builders have an inventory of 311,000 unsold homes, which translates into a 10.7-month supply at the current sales pace, according to Census Bureau report.

Former chief executive David Moffett is returning to Freddie Mac to run the finance division in the wake of the apparent suicide of the company's acting chief financial officer David Kellermann.Freddie interim chief executive John Koskinen welcomed Mr. Moffett's offer to temporarily return as a consultant while Freddie searches for a permanent CFO. "He knows the company well from his time as the chief executive, and has built an impressive career in finance and accounting...with other leading public companies," Mr. Koskinen said.

Freddie Mac's issuance of mortgage-backed securities totaled $57.7 billion in March — nearly double its activity in February as a result of the surge in refinancings. The mortgage giant purchased $52 billion in refinanced mortgages in March, its largest refinance purchase month since 2003. The company also said it added $45.1 billion in mortgage assets to its investment portfolio, including $19.1 billion of its own MBS. And the mortgage investment portfolio grew to $867.1 billion as of March 31. Meanwhile, delinquencies continue to creep up. In March, the percentage of Freddie single-family loans that are 90 days or more past due or in foreclosure rose to 2.29%, up 16 basis points from the previous month, and up from 0.77% in March of 2008.

DebtX, Boston, will sell more than $269 million in commercial real estate, commercial & industrial and consumer loans from two Federal Deposit Insurance Corp. receiverships on May 12. The first sale consists of $190 million in loans from the Bank of Clark County, Vancouver, Wash., and consists of performing and non-performing loans secured by office, industrial, retail, healthcare, autos, and business assets. The second sale is of $79 million in loans from FirstBank Financial Services, McDonough, Ga., including performing and non-performing loans secured by retail, office, industrial, auto/consumer, and business assets. Due diligence materials for both transactions are now available at http://www.debtx.com.

An increase in a Federal Housing Finance Agency housing price index during February marks the first time it has risen two consecutive months since early 2007. The HPI that tracks Fannie Mae and Freddie Mac purchase mortgage transactions rose 0.7% in February and 1% in January. It last saw two consecutive months of increases in March and April of 2007. Prices in the Pacific Coast states rose 3.8% in February where a large proportion of sales involve foreclosed properties and short sales, particularly in California. FHFA senior economist Andrew Leventis said the agency's HPI is picking up a large proportion of distressed sales — contrary to the belief among some economists that the GSE-based index does not include REO sales. In the fourth quarter, "about 50% of our sample for California involved distressed sales," Mr. Leventis said. For the 12 months ending in February, the FHFA HPI was down 6.5%. "The U.S. index is 9.5% below its April 2007 peak," the government-sponsored enterprise regulator said.

An increase in a Federal Housing Finance Agency housing price index during February marks the first time it has risen two consecutive months since early 2007. The HPI that tracks Fannie Mae and Freddie Mac purchase mortgage transactions rose 0.7% in February and 1% in January. It last saw two consecutive months of increases in March and April of 2007. Prices in the Pacific Coast states rose 3.8% in February where a large proportion of sales involve foreclosed properties and short sales, particularly in California. FHFA senior economist Andrew Leventis said the agency's HPI is picking up a large proportion of distressed sales — contrary to the belief among some economists that the GSE-based index does not include REO sales. In the fourth quarter, "about 50% of our sample for California involved distressed sales," Mr. Leventis said. For the 12 months ending in February, the FHFA HPI was down 6.5%. "The U.S. index is 9.5% below its April 2007 peak," the government-sponsored enterprise regulator said.

Lisa Lievanos of Fontana, Calif., has been convicted of charges related to her being a straw borrower in a mortgage fraud scheme that fraudulently collected more than $1 million in loan proceeds. Lievanos is the fourth defendant in this case. Angela Cotton, who ran a bogus title company, pleaded guilty and is scheduled for sentencing on June 15. Terral Toole pleaded guilty and is scheduled for sentencing on June 1. Miles Davis, a loan processor, pleaded guilty and was sentenced to three years of probation, including six months of home detention. The evidence presented at Lievanos' trial showed that Cotton found properties in Rancho Cucamonga and, with the assistance of real estate professionals and people such as Lievanos who agreed to sell their personal information, fraudulently "purchased" one of the properties and obtained a $635,000 loan. A second loan involved a refi of Lievanos' residence, which netted the defendants $526,500. In the loan application, Lievanos included false employment information, income information, occupancy declarations, and rental agreements relating to her financial condition. On the loan applications, the four defendants allegedly included false employment information. Cotton established fraudulent escrow companies to complete the fraudulent sale transactions. As a result of the scheme, banks suffered losses of nearly $2 million. U.S. District Judge Florence-Marie Cooper has scheduled sentencing for Lievanos for July 13.

With foreclosure rescue schemes and short sales scams on the rise, the Portland office of the FBI and the U.S. attorney's office for the District of Oregon are expanding their efforts to identify and prosecute mortgage fraud in the state by establishing special Internet and phone tip lines to handle reports of mortgage fraud. The Oregon Mortgage Fraud Working Group, which has been operating since 2007, will handle the investigations. The majority of the Oregon Mortgage Fraud Working Group investigators are working major cases involving multiple suspects, multiple borrowers and millions of dollars in fraudulent loans. The Oregon Mortgage Fraud Working Group also focuses on emerging crime trends that are associated with the growing tide of foreclosures, such as foreclosure rescue schemes and short sales. People are urged to report any mortgage fraud activity or information by visiting Portland FBI's website at http://portland.fbi.gov, calling the phone tip line at (503) 273-5813, or emailing mortgagefraudtips.portland@ic.fbi.gov.