Compliance & Regulation

Daniel Adam Rooks, his father Alford Eugene Rooks, Stanley Garfield Williams, Jr., Henry Clay Blake, Jr., and Cynthia Tilley Greer, all from North Carolina, have been charged for scheming to obtain money and property from homebuyers and lenders by materially false and fraudulent pretenses. According to the indictment, from approximately January 1998 until April 2004, Daniel Rooks bought about four tracts of land in Whiteville, N.C., subdivided the properties, put trailers on them and sold them to low-income people from around the area. He originally sold these properties with the aid of family members. He then partnered with two mortgage brokers, Mr. Williams and another individual out of Greenville, N.C., to finance the mobile homes. Daniel Rooks lied to the buyers about the estimated cost of the property, the payment amounts and his ability to secure loans. After taking their Social Security numbers and names, he would turn the information over to Mr. Williams and the other broker, who would falsify the loan applications, sending them in for approval. Mr. Blake, a registered property appraiser, prepared false and inflated appraisals of parcels of property that were submitted to mortgage lenders. Ms. Greer, a paralegal and notary, prepared and notarized real estate documents and arranged and conducted real estate closings, sometimes without the borrower's knowledge or presence and disbursed settlement checks. After the first round of sales were foreclosed, Mr. Williams began buying up the foreclosed property, finding new buyers or getting straw buyers whose names and Social Security numbers he could use to sell them all over again. More than 100 loans allegedly were secured and approximately $6 million in fraudulent funds were received.

The FDIC board of directors has approved a 7-basis point hike in deposit insurance premiums for 2009 to address the high cost of bank failures and a declining reserve ratio. The across-the-board premium hike will raise assessments for most healthy banks from 5 basis points to 12 basis points and doubled first quarter assessment revenue to $2.3 billion. Federal Deposit Insurance Corp. staff estimate that bank failures in 2008 will cost the Deposit Insurance fund $18.9 billion. And, its reserve ratio has sunk from 1.19% on March 31 to 0.76% as of Sept. 30. Meanwhile, the agency is boosting its operating budget by nearly 85% to $2.2 billion to deal with a rising number of bank failures and receiverships in 2009.

Five Ohio residents have been charged for their roles in a mortgage fraud scheme. Paul A. Lesniak of Strongsville, Uri Gofman of Beachwood, Grennadiy Simkhovich of Highland Heights, Dave Pirichy of Burton and Howard Sieferd, Jr., of Euclid, have been charged with allegedly conspiring to purchase 18 properties in the Cleveland area for almost $2 million. The indictment alleges that Mr. Lesniak completed and submitted false and fraudulent loan applications with the assistance of Mr. Pirichy, a broker for Central National Mortgage, which falsified his employment, overstated his income and assets, falsified his intent to occupy the property and concealed the source of the down payment funds, which were provided by Mr. Gofman and Mr. Simkhovich through their company, Real Asset Fund, in order to obtain the financing to purchase the eighteen properties. The indictment also alleges that Mr. Sieferd served as the title agent on the properties and conspired with Mr. Gofman and Mr. Simkhovich to allow the loan proceeds to be fraudulently and improperly distributed. The defendants allegedly did all of this in order to defraud Long Beach Mortgage Company, Argent Mortgage Company and Mortgage IT into funding the loans.

Netherlands-based life insurance company Aegon N.V. has informed the U.S. Department of the Treasury that it is withdrawing its application for participation in the Troubled Asset Relief Program. "Aegon has decided not to seek access to TARP funds," said chief financial officer Jos Streppel. "The ongoing steps we are taking have positioned Aegon to enter 2009 with a strong capital position." In a related move, the company has withdrawn its application to the Office of Thrift Supervision in the United States to gain a thrift charter, a prerequisite for participation in TARP.

The National Association of Home Builders has trimmed 52 positions from its workforce as the housing and mortgage crisis shows no signs of abating any time soon. Of the 52 jobs eliminated, roughly half were vacant. A spokeswoman for NAHB declined to provide any details about the layoffs or its membership ranks. She would only say that NAHB has 235,000 "membership companies" as of December and offered no comparisons to the same month a year ago. Last month, the trade group's chief economist David Seiders retired. Meanwhile, industry executives are saying the Mortgage Bankers Association is losing many members. According to a report in The Washington Post, MBA has lost roughly 500 members over the past year, noting that membership stands at 2,550. At press time, MBA's spokeswoman had not returned a telephone call about the matter.

The early comments regarding the appointment by president-elect Barack Obama of Shaun Donovan to run the Department of Housing and Urban Development have been favorable. Mr. Donovan is presently the commissioner of the New York City Department of Housing Preservation and Development. He served at HUD during the Clinton administration as deputy assistant secretary for multifamily housing. After leaving HUD, Mr. Donovan worked at Prudential Mortgage Capital Co. as managing director for Federal Housing Administration lending and affordable housing investments. Mortgage Bankers Association chief operating officer John Courson said, "His work in the private, non-profit and academic sectors gives him a unique perspective on the current turmoil in the housing market and he has been widely hailed during his time as New York City's Housing Commissioner. We look forward to working with him to solve the ongoing crisis in the U.S. housing market." Current HUD secretary Steve Preston said, "As the former acting commissioner of FHA, Commissioner Donovan is well aware of the issues facing American homeowners and the need for HUD to continue being a major force in helping stabilize the mortgage market. Commissioner Donovan will take over a department that is in a better position today than ever before to serve the millions of Americans who count on HUD." Mr. Obama said his economic team is developing a "bold plan" to stem a rising tide of foreclosures. He emphasized that the country needs a coordinated federal effort with the Treasury Department, FDIC and HUD working together to "dramatically increase the number of families who can stay in their homes."

GMAC Financial Services - which is trying to become a bank holding company and tap the Treasury's TARP program - has extended the deadline for its $38 billion note exchange program until Dec. 26, 2008 at 11:59 p.m. The "early" delivery portion of the note exchange was extended to Dec. 16 at 11:59 p.m. from this past Friday. GMAC, the parent of Residential Capital Corp., the nation's sixth largest servicer, is offering investors $0.55 to $0.85 on the dollar in cash or in the form of new bonds and/or preferred shares. It needs a 75% participation rate from note holders to reach its goal of amassing $30 billion in regulatory capital to form a bank holding company. Late last week, its participation rate was about 25%. ResCap controls roughly $400 billion in mortgage servicing rights. If GMAC does not become a BHC (and tap TARP funds) it may be forced into bankruptcy protection.

President-elect Barack Obama said he has picked Shaun Donovan to run the Department of Housing and Urban Development and help his administration reduce foreclosures and expand access to affordable housing. The nominee for HUD secretary is presently the commissioner of the New York City Department of Housing Preservation and Development. He served at HUD during the Clinton administration as deputy assistant secretary for multifamily housing. After leaving HUD, Mr. Donovan worked at Prudential Mortgage Capital Co. as managing director for Federal Housing Administration lending and affordable housing investments. He has master's degrees in public administration and architecture from Harvard University. Mr. Obama said his economic team is developing a "bold plan" to stem a rising tide of foreclosures. He emphasized that the country needs a coordinated federal effort with the Treasury Department, FDIC and HUD working together to "dramatically increase the number of families who can stay in their homes."

State officials in Nevada have arrested William Vargas, one of three defendants who allegedly operated a foreclosure rescue scam in Las Vegas beginning in February 2007. His business was operated under the name Federal Housing Aid. Two additional defendants are still at large with warrants issued for their arrests: Paula Luna is believed to be in California and Michael Sinclair has reportedly fled to the Philippines. The alleged scheme involved the collection of upfront fees for the purpose of assisting the victims with avoiding foreclosure on their homes. The suspects allegedly charged the victims between $899 and $1,500 for foreclosure rescue services and offered a 100% money back guaranty, claiming their company would refund the money if the foreclosure could not be stopped. Investigators working for the attorney general's Mortgage Fraud Task Force arrested Vargas.

Peter Affatati of Coral Springs, Fla., pleaded guilty to orchestrating a $40 million mortgage fraud scheme involving more than 50 residential mortgages, most in South Florida. In the scheme, Affatati would use straw buyers of the residential properties through his company, Assurance Title. Affatati would falsify the employment, income and assets of the straw buyers to qualify them for large mortgages from institutional lenders. Upon the funding of the mortgage, he would wrongfully divert a large portion of the proceeds for his own use and benefit. Affatati was also convicted of defrauding a victim in North Carolina by selling him fictitious securities in the amount of $390,000.