FACTS
As of Jan. 1, the Department of Real Estate has issued over 22,000 mortgage loan originator license endorsements. MLO license endorsements applications continue to flood in and the DRE expects to eventually issue over 30,000 endorsements. (cadrepr12011)
MORAL
Considering the annual education requirements and considering that as of April 1 compensation is restricted to three points on single family residential 1-4, I wonder how many will be around at the end of 2012?
PROPOSED LEGISLATION FOR CALIFORNIA
FACTS
S.B. 6; 2011-12 REGULAR SESSION, SENATE BILL 6, DATE-INTRO: DECEMBER 6, 2010, Relates to real estate brokers and salespersons. Prohibits a licensee from providing an opinion of value of real property if his or her compensation is affected by that opinion. Prohibits a licensee from knowingly or intentionally misrepresenting the value of real property. Prohibits an appraisal management company from improperly influencing any appraisal. Prohibits a person or entity preparing an appraisal from having a specified interest in the property for which the appraisal is performed.
S.B. 53, 2011-12 REGULAR SESSION, SENATE BILL 53, DATE-INTRO: DECEMBER 16, 2010, Authorizes the real estate commissioner to issue citations to unlicensed persons the commissioner believes to be engaging in activities for which a real estate license is required or to licensees who are in violation of the Real Estate Law.
Requires certain real estate brokers who are exempt from the Escrow Law to file a report. Provides for the suspension of licenses. Makes changes related to the selling of securities in issuer transactions. Provides the Real Estate Commissioner with access to DMV records.
MORAL
As you can see, there are not enough restrictions so here are more. Senate Bill 53 allowing the commissioner to issues citations would appear to be very good, especially as applied to unlicensed people.
A CALIFORNIA REMINDER FOR HIRING A BROKER-ASSOCIATE OR A DESIGNATED OFFICER FOR PURPOSES OF MORTGAGE LOANS
FACTS
Broker-associates who intend to perform MLO activities employed by a broker or corporation under a broker-salesperson agreement must be separately authorized to conduct those activities through the NMLS by filing Form MU4. After the MU4 is submitted, the broker will need to create a company relationship and request a sponsorship from the employing broker corporation.
All licensed broker officers of a licensed corporation who intend to perform MLO activities on behalf of the corporation, will need to create a company relationship and request a sponsorship from the corporation.
MORAL
If you are not confused yet, I will see what I can do for you later.
TEN PEOPLE INDICTED IN, CALIFORNIA REAL ESTATE SCAM; LENDERS DEFRAUDED OF OVER $20 MILLION
FACTS
On Jan. 21, it was announced by the FBI that David Crisp; Carlyle Cole; Julie Farmer; Sneha Mohammadi; Jayson Costa; Jeriel Salinas; Robinson Nguyen; Michael Munoz; Jennifer Crisp; and Caleb Cole were charged in a 56-count indictment with conspiracy to commit bank, mail and wire fraud, and with individual counts of mail fraud. Certain of the defendants were also charged with wire fraud, bank fraud and conspiracy to launder money. The indictment was returned Jan. 13 by a federal grand jury in Fresno.
On Jan. 20, David Crisp was arrested in San Diego. Carlyle Cole was arrested in Ventura County, Calif. Farmer, Mohammadi, Costa, Salinas, Munoz, and Caleb Cole were arrested in Bakersfield, Calif. Nguyen was arrested in Monterey, Calif. Jennifer Crisp surrendered to authorities on Jan. 21.
David Crisp and Carlyle Cole were the owners of Crisp, Cole & Associates, also known as Crisp & Cole Real Estate. They also controlled Tower Lending, CCA’s in-house mortgage broker business. Julie Farmer, Sneha Mohmamadi, Jayson Costa, Jeriel Salinas, Robinson Nguyen, and Michael Munoz were employed at CCA and/or at Tower Lending. Jennifer Crisp is the wife of David Crisp and Caleb Cole is the son of Carlyle Cole. Five other persons, including Megan Balod, Leslie Sluga, Kevin Sluga, a CPA who handled accounting matters for CCA, and Jerald Teixeira and Christopher Stovall, both former loan officers for Tower Lending, have previously pleaded guilty in related cases.
The indictment alleges that, from approximately January 2004 to September 2007, the defendants perpetrated a scheme to defraud mortgage lenders by submitting fraudulent loan applications with material misrepresentations, including misrepresentations concerning the borrower’s income, assets, employment status, and intent to use the home as the borrower's primary residence. The indictment alleges that the defendants perpetrated the scheme in part by flipping homes through a series of fraudulent transactions to co-defendants, straw buyers, and others in order to artificially inflate the prices of the residences. The defendants typically increased the loan amounts and used close to 100% financing, in order to extract the inflated equity amounts from the properties on each financing transaction. CCA generally acted as the real estate brokerage on the sales, and Tower Lending acted as the mortgage brokerage on the financing transactions, generating substantial commissions and fees for the defendants on each transaction. The scheme involved more than $20 million in losses to lenders.
The maximum statutory penalty for the conspiracy, mail fraud, wire fraud and bank fraud counts is 30 years in prison and a $1 million fine. The maximum penalty for money laundering is 10 years in prison and a fine of $500,000. (usattyedca12111)
MORAL
Note the ongoing fact that it takes about two to three years to build a case. If you review the prior mortgage fraud cases I have published you will see the trend is there. Note the investigation is ongoing.
STANISLAUS COUNTY HIT WITH NEW MORTGAGE FRAUD SCAM SAYS OFFICE OF DISTRICT ATTORNEY
FACTS
Con artists seem to be targeting Latino homeowners facing foreclosure, and some real estate professionals are getting sucked in as well, said Glenn Gulley, an investigator with the county district attorney's office.
In the latest variation, people behind on payments are told they can keep their homes by signing up for a new mortgage, typically at 25% of what they owe, with lower premiums, plus a fee that's commonly $1,000 to $3,000. Fraudsters then file a reconveyance at the county recorder's office, claiming that the legitimate loan has been paid off. Duped homeowners sometimes pay thousands of dollars toward the "new" loan—and still end up losing their houses when the legitimate lender forecloses.
Most victims of the latest "fraudulent reconveyance" scam speak little or no English. Some real estate agents and escrow officers are lured to refer clients for a cut of the proceeds.
Bay Area businessmen Kurt F. Johnson and Dale Scott Heineman were sentenced nearly three years ago to federal prison terms of 25 years and 21 years, respectively, for running such operations through the Dorean Group.
MARYLAND TITLE CO. OWNER AND TWO EMPLOYEES INDICTED IN $4 MILLION MORTGAGE FRAUD SCHEME
FACTS
On Jan. 19, three Maryland residents were indicted for mail and wire fraud arising from a scheme to defraud lenders and a title insurance company of over $4 million: Steven J. Troese Sr., James Kevin Hughes and Brenda Lukenich.
According to the 12-count indictment, Troese was an attorney and owned or controlled title companies that he created in the 1980s and 1990s that did business in the Baltimore, Annapolis, and Washington metropolitan areas, including Troese Title Services Inc., located in Camp Springs; Troese/Hughes Title Services Inc., located in Greenbelt; and Troese/Prestige Title Services Inc., located in Ellicott City. Troese entered into agency agreements with Chicago Title Co., which authorized the Troese title companies to sell its title insurance policies to lenders and buyers. While the title insurance policies obligated Chicago Title to pay losses resulting from undiscovered defects in the title of the property, the agency agreements expressly provided that Troese and the Troese title companies were responsible to Chicago Title for any losses associated with fraud, dishonesty, or theft.
The indictment alleges that beginning at least as far back as 2004, a substantial shortfall began to develop in an escrow account maintained by Troese Title and Troese/Hughes for the receipt and disbursement of funds in connection with real estate closings carried out by both title companies. This shortfall is alleged to have been partly the result of mistakes made during the closing process on several transactions that required costly pay-outs to resolve, and partly from several large and long-undetected thefts by individual employees, although these factors did not account for all of the deficit. In the spring of 2005, Lukenich, the escrow accountant for the title companies, advised others at Troese Title and Troese/Hughes that the shortfall totaled at least $2 million. The shortfalls were further aggravated in 2006 through 2008 as the real estate and refinancing boom that had started in approximately 2002 first cooled, then collapsed.
Because of these shortfalls, both Troese Title and Troese/Hughes allegedly delayed making the required payoffs to the original lenders after each closing in order to generate a “float,” whereby funds coming into the escrow accounts from later transactions could be used to make the payments due on transactions that had already closed. Initially, funds were held for periods of three to five days, but this “hold” allegedly later grew to 10 days and even longer. By mid-2008, payments were being held for three weeks or more.
The indictment further alleges that instead of disclosing the shortfalls to Chicago Title, the defendants concealed the shortfalls. In an effort to generate cash to cover at least part of the shortfall, Troese and Hughes refinanced their homes, using Troese/Hughes as their title company. Instead of using the money from the new lenders to pay off their old mortgages as required, they allegedly used most of the money to attempt to cover the shortfall, which continued to grow over time. Although they caused the HUD-1 settlement statements to state that funds from the new lenders were used to pay off the outstanding debts, Troese allegedly caused the funds from the new lender to be used to make mortgage pay-offs on other closings previously handled by Troese Title. Because the original lenders were never paid off, the new lenders on the defendants’ residences did not have a first lien on the homes to secure the repayment of funds that the new lenders had advanced. To keep the original lenders from realizing that the homes had been refinanced, Troese and Hughes allegedly continued to make the monthly mortgage payments to the original lenders. Using this same scheme, Troese also allegedly caused a Troese employee, a manager, and a president of Troese Title to refinance their three homes.
Although Chicago Title remained unaware of the scheme to cover up the shortfalls, the indictment alleges that Troese Title and Troese/Hughes employees failed on a number of occasions to uncover title defects and also had made other mistakes that resulted in numerous claims being filed against Chicago Title. In the spring of 2008, Chicago Title determined that its relationships with Troese Title and Troese/Hughes were no longer profitable, and notified Troese that as of May 31, 2008, it was terminating its relationship with Troese individually, and with Troese Title and Troese/Hughes. Chicago Title was, however, willing to continue its relationship with certain other Troese-related title companies, including Troese/Prestige, whose insurance policies had not generated a similarly high volume of claims. Accordingly, a new agency agreement was concluded that covered just those other entities.
According to the indictment, by May of 2008, Troese Title and Troese/Hughes were at least $1.5 million behind in paying off the outstanding mortgages on transactions they had already closed. The defendants knew that if these companies were unable to conduct settlements and stopped receiving additional infusions of loan proceeds to replenish the shortfall, they would quickly find it impossible to make the remaining unpaid mortgage pay-offs still owed by each company, and the entire scheme would be revealed. Troese allegedly decided that Troese Title and Troese/Hughes would continue to operate from their old offices in Camp Springs and Greenbelt, but that without informing Chicago Title, they would operate under the Troese/Prestige name and would issue title insurance policies under the new agreement between Chicago Title and Troese/Prestige. Troese allegedly hid the fact that Troese Title and Troese/Hughes had started conducting operations under the Troese/Prestige name not only from Chicago Title, but also from the manager and employees of the original Troese/Prestige office in Ellicott City. Chicago Title believed that the title insurance policies that were still being sold by the former Troese Title and Troese/Hughes offices were actually originating from the Troese/Prestige office in Ellicott City.
The indictment alleges that the defendants agreed that the initial funds generated by the secret continuation of Troese Title and Troese/Hughes under the Troese/Prestige name would be used to cover the outstanding mortgage pay-offs still owed by each company. From approximately early June until the end of the first week of August 2008, following each closing conducted under the name Troese/Prestige, an employee of Troese Title or Troese/Hughes would send a copy of the HUD-1 by Federal Express to the new lender, falsely representing that the proceeds of the loan had been disbursed to the original lender.
As a result of the scheme, Chicago Title allegedly suffered a loss of over $4 million.
The defendants face a maximum sentence of 20 years in prison on each of the eight counts for mail fraud and on each of the four counts for wire fraud. (usattymd11911)
MORAL
Prosecutors here went back six years. What is curious, is the original shortfalls appear to be due to other employees that initially embezzled the money. So the question is why didn’t the title companies make a claim against the fidelity bonds since most companies that handle large sums are required to have them. By having the bond pay off the rest of the skullduggery (if you will) should not have occurred. Nevertheless they are innocent until proven guilty.
MASSACHUSETTS ATTORNEY GETS 12 YEARS IN FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
On Jan. 20, Eric L. Levine, a Brookline attorney, was sentenced to spend the next 12 years in prison, after he was convicted by a federal jury as part of a scheme to defraud mortgage lenders of more than $10.6 million.
Levine was convicted by a federal jury in Boston on conspiracy, wire fraud and money laundering charges following a seven-week trial in June, according to Ortiz’ office.
Levine was among 11 defendants indicted in 2008, after prosecutors said they were involved with a mortgage fraud ring that took more than $10.6 million from 10 lenders through 21 fraudulent property transactions in 2005 and 2006. He was among five defendants found guilty in June on conspiracy and wire fraud charges, and Levine was also convicted on a money laundering charge. Five additional defendants pled guilty before trial.
Levine and the 10 other defendants used falsified documents, inflated purchase prices and so-called straw buyers to defraud 10 mortgage lenders from May 2005 to June 2006. Prosecutors said the scheme involved 21 properties in South Boston, Dorchester, Jamaica Plain, Quincy, Hyde Park and Cohasset. Levine distributed money collected from the operation to his co-conspirators, kept some of money himself, or deposited some into accounts he controlled. (brookline,ma121110)
MORAL
It took six years from start to finish and now the next 12 in a federal prison where there is no parole. He will be 68 when he gets out. Note as I have said before, the federal prosecutors and investigators are generally very good and definitely very tenacious. Sort of like a bulldog. However, in our representation of clients before them, I have found them to be straight forward and fair.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
