FACTS
Bank of America told investors that its liabilities for mortgage repurchase requests from Fannie Mae and Freddie Mac could be worse than expected. Bank of America now says its total potential GSE losses for the mortgages sold to Fannie Mae and Freddie Mac stand at $7.8 billion. (sfbustmes8611)
MORAL
I thought “BBB” stood for Better Business Bureau. I guess I was wrong. It stands for “Buy Back Billions.” What does this mean to wholesale lenders, mortgage brokers and loan officers that did these loans? In this attorney's opinion B of A will pursue the originators with a vengeance to recover as much of the expected losses as possible. B of A will review the files for any, and I do mean any, defect from procedure. It will send demand letter to those involved (especially the wholesale lenders and mortgage brokers) to buy back the loans pursuant to the written agreement they signed without negotiating terms. One of the terms in the agreement is an absolute right of the buyer of the loan to demand indemnification of the loan regardless of fault. It will then sue everyone involved when B of A is not made whole. Mark my words. It is already occurring with FDIC lawsuits, Chase lawsuits, Wells Fargo lawsuits and bankruptcy trustee demands to buy back
CFPB REQUIRES CREDITORS ACCEPTING ALTERNATIVE MORTGAGE TRANSACTIONS TO COMPLY WITH THE RULE ISSUED JULY 22
FACTS
Federal housing creditors and state housing creditors relying on the provisions of the Alternative Mortgage Transaction Parity Act Regulation D to make alternative mortgage transactions must satisfy the CFPB's substantive requirements governing the origination of such transactions. AMTPA authorizes state-licensed or -chartered housing creditors to make alternative mortgage transactions in compliance with federal rather than state law, in order to establish parity and competitive equality between state and federal lenders. This interim final rule applies to an alternative mortgage transaction if the creditor received an application for that transaction on or after July 22. If the creditor received the application before July 22, the alternative mortgage transaction is generally grandfathered and remains subject to the AMTPA provisions and regulations in effect at the time of application.
Creditors must adjust interest rates in accordance with either an index outside the creditor's control or a formula or schedule identifying the amount by which the interest rate or finance charge may increase and under what circumstances the change may be made. For open-end HELOCs, creditors must comply with the disclosure requirements set forth in Reg. Z.
Renewable balloon-payment mortgages requires creditors to provide a written commitment to renew the transaction at specified intervals throughout the amortization period. The rule does provide for limited instances in which a creditor would not be required to renew the transaction in spite of the existence of this written commitment. If an alternative mortgage transaction is also a high cost or higher priced mortgage loan, creditors must comply with Reg. Z involving high cost mortgages and higher priced mortgages. Creditors must also comply with Reg. Z restrictions with respect to prepayment penalties. State laws governing prepayment penalties are no longer preempted under AMTPA.
APPLICATION OF RULE
The CFPB has given federal housing creditors a one-year grace period (until July 22, 2012) for compliance with its new standards for originating alternative mortgage transactions. The interim final rule's definition of ''alternative mortgage transaction'' is limited to transactions in which the interest rate or finance charge may be adjusted or renegotiated. Previously preempted state consumer protection laws will apply to fixed-rate mortgage loans with interest-only payment periods or negative amortization features, fixed-rate balloon loans where the lender does not make a commitment to renew the loan, and certain other fixed-rate products that previously qualified as alternative mortgage transactions but no longer qualify because of the Dodd-Frank Act.
The rule provides that state laws are preempted only to the extent that they restrict the ability of a state housing creditor to adjust or renegotiate an interest rate or finance charge with respect to an alternative mortgage transaction or the ability of a state housing creditor to change the amount of interest or finance charges included in a payment as a result of the adjustment or renegotiation of the rate or charge. The interim final rule provides that general state laws regulating loan features or charges that are not integral to alternative mortgage transactions are no longer preempted. Accordingly, state law mortgage disclosure requirements and restrictions on late fees, rate increases as a result of late payment, prepayment penalties, interest-only payment periods, and negative amortization are no longer preempted under AMTPA with respect to alternative mortgage transactions. The CFPB interim final rule may be reviewed at
MORAL
Read the rule. Take two aspirins. Call me in the morning if you understand it.
CALIFORNIA MAN PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
On July 29, William E. Baker of Chico pled guilty to one count of mail fraud for his role in a multi-million-dollar “builder bailout” mortgage fraud scheme in Chico. During his plea hearing in district court, Baker admitted that he and other conspired with Garret Griffith Gililland to artificially inflate the sales prices of new homes sold to Gililland's buyers. After close of escrow, Baker & Baker Construction would rebate significant sums of money to a front company controlled by Gililland. On one occasion, Baker misrepresented the purpose of the payments to Gililland's company as “improvements for three houses.” In fact, Gililland's company made no improvements to homes sold by Baker to Gililland's buyers. In court, Baker admitted to knowing that the lenders financed the properties at 100 percent of the inflated purchase price. He admitted that he intended to defraud lenders by inducing them to fund home loans in greater amounts than the real sales price. Baker also admitted that had the lenders known that the sales prices were inflated, they would not have approved the loans.
To my readers: Please note the following quote and understand why we recommend that anyone uncertain about questionable loans they were involved with starting in 2004 should see their attorney. “This is another significant plea in an ongoing investigation of mortgage fraud involving subjects located throughout California and other states," said U.S. attorney Benjamin Wagner.
Other significant pleas in this case include those of Gililland; Anthony G. Symmes of Paradise; and Shane Burreson of Orland, the president of Nor Cal Innovative Investments Inc. Remaining defendants include Leonard Williams of Sacramento, a licensed real estate professional; Brandon Resendez of Chico; and Kesha Haynie of Chico, a licensed real estate professional. Trial of the remaining defendants is scheduled for Sept. 12.
Sentencing for Baker is scheduled for Nov. 18. He faces a maximum statutory penalty of 20 years in prison, a $250,000 fine, and three years of supervised release. (usattyedca72911)
MORAL
It is less expensive for a person to ask their attorney first if it is legal and what the risks are than it is to wait until the person is sued and the attorney has to defend.
COLORADO WOMAN PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
On July 15, Kimberly K. White of Elizabeth pled guilty before U.S. District Court Judge Robert E. Blackburn to one count of wire fraud related to a mortgage fraud scheme. White was named in a superseding indictment issued by a federal grand jury in Denver on May 20, 2010. White is scheduled to be sentenced by Judge Blackburn on Sept. 30.
Between March 26, 2005 and June 30, 2005, Kimberly White worked with her co-defendants, Shawn Tieskotter and Craig Patterson, to execute a scheme to defraud various financial institutions as well as commercial mortgage lenders in connection with residential mortgage loan applications related to 13 properties in the Denver metropolitan area.
White, then a licensed real estate agent, helped Tieskotter find various residential properties available for purchase and drafted contracts for the purchase of the properties. Tieskotter and Patterson prepared and submitted applications for two loans, a first mortgage and a second mortgage, in connection with Tieskotter's purchase of each property described in the Indictment. Each of these applications contained materially false and fraudulent representations that Tieskotter intended to use the property as his primary residence. Most of the applications also contained materially false and fraudulent representations about the extent of Tieskotter's liabilities related to other residential mortgage loans, in that they failed to include a complete list of the properties Tieskotter owned or was in the process of purchasing and falsely indicated that one of Tieskotter's other properties was leased. Some of the applications were supported by fictitious leases.
They also hid from lenders the extent of Tieskotter's liabilities for other mortgages. This practice further affected the lenders' ability to assess Tieskotter's ability to re-pay the loans for which he was applying. White was aware that these multiple applications were being prepared and that they did not reflect all of Tieskotter's liabilities.
Tieskotter and Patterson received money from the transactions at the time of closing by causing the disbursement at closing of additional monies to PK Design Group LLC, an entity controlled by Patterson, or Dream Design, a trade name for an entity controlled by Tieskotter. Tieskotter and Patterson concealed from the lenders and other parties associated with the transactions their control of these entities. Tieskotter and Patterson also misrepresented that these monies would be used entirely for repairs or improvements to the properties, which led the lenders to falsely believe that the value of their collateral would increase as a result of these payments. White assisted with this process by providing versions of the real estate purchase contracts which omitted the provisions indicating that monies would be disbursed at closing to PK Design Group, LLC or Dream Design to the real estate appraiser and to Patterson, who in turn provided them to the lenders. This practice improperly helped generate appraisals with sufficient value to allow Tieskotter and Patterson to receive money back at the closing.
White also generated a contract for Tieskotter to purchase a property located in Centennial, Colo. Although the actual contract provided that Dream Design would receive $32,500 at closing, White provided a version of the contract to the appraiser which omitted this provision. Then, on or about May 20, 2005, there was an interstate wire transfer of $294,828.82 from the Bank of New York to a Land Title account in Lakewood, Colo., in order to fund the fraudulently obtained loan Tieskotter used to purchase this property.
Tieskotter was sentenced by Judge Blackburn to serve nine months in prison followed by nine months of home detention, and then three years of supervised release. He was also ordered to pay restitution totaling $1,181,528.28. Patterson was sentenced to serve 10 months in prison, followed by 10 months of home detention, and then three years of supervised release. He was also ordered to pay $1,181,528.28 in restitution joint and severally with Tieskotter. Wire fraud carries a penalty of not more than 20 years' imprisonment, and up to a $250,000 fine, per count. (usattyco71911)
MORAL
I will bet he said that the reason for the two properties is he was not sure the first one would go through and submitted a second offer so he could have a home. I wish I had a dollar for every time I heard this. Believe me when I say the FBI and the courts do not buy into it at all. Note that the loans occurred six years ago. Note also that putting down primary residence on the loan application is a federal felony. Now I have heard that “I changed my mind after I applied for the loan.” However, the borrower has a legal obligation to correct the loan application before the loan closes. It is not all that difficult to pull up the date on the loan applications to see when the borrower applied for the loan and the same holds true for the credit reports which are dated and show the name of the loan officer that “pulled the credit.”
TWO FLORIDA LOAN OFFICERS AND ONE TITLE AGENT PLEAD GUILTY TO $2.5 MILLION REVERSE MORTGAGE FRAUD
FACTS
On Aug. 3, Louis Gendason, Kimberly Mackey and John Incandela pleaded guilty to one count of conspiracy to commit wire fraud for their participation in a $2.5 million home equity conversion mortgage, or reverse mortgage, fraud scheme.
From May 2009 through November 2010, the defendants engaged in a reverse mortgage scheme that defrauded unwitting borrowers, Genworth Financial Home Equity Access Inc. and the Federal Housing Administration. Gendason and Incandela, working as loan officers at 1st Continental Mortgage, with offices in Fort Lauderdale and Boca Raton, Fla., solicited individuals, ages 62 and older, from around the country to refinance their existing mortgages with a reverse mortgage loan financed by Genworth, located in Rancho Cordova, Calif. To qualify the borrowers for the loans, Gendason altered real estate appraisals to fraudulently inflate the value of the borrowers' properties. In fact, however, none of the borrowers had sufficient equity in their properties to qualify for a reverse mortgage. The defendants then submitted the fraudulently inflated appraisals to Genworth. Based on the false documentation, Genworth approved and the FHA insured more than $2,572,813 in reverse mortgage loans.
As a further part of the conspiracy, Mackey, a licensed title agent and proprietor of Real Estate One Land Services Inc., located in Pittsburgh, fraudulently closed the Genworth loans, failing to pay off the borrowers' existing mortgage loans. Genworth wired the loan proceeds to Mackey as the designated closing agent for 1st Continental. Mackey attempted to conceal the fraudulent loan closings by preparing false HUD-1 settlement documents that showed that the existing mortgages had, in fact, been paid off. Between May 2009 and November 2010, Mackey received loan proceeds from Genworth totaling $2,572,813.19. Mackey fraudulently diverted at least $988,086.33 to a bank account controlled by Incandela and Gendason, who used this money for their personal benefit.
The defendants engaged in a loan modification scheme to conceal the existence of the Genworth reverse mortgage transactions from the original mortgage lenders, whose loans remained unpaid. To this end, Gendason, Incandela and Mackey conspired to create fictitious offers to buy some of the borrowers' properties, in the form of “short sales.” A short sale is a sale of real estate in which the sale proceeds are less than the balance owed on the loan to the mortgage lender, but avoids foreclosure and related costs. In other instances, to hide the existence of the Genworth reverse mortgage loan from the original lenders, the defendants made monthly mortgage payments to the borrowers' original lenders.
Sentencing for Gendason has been scheduled for Nov. 8 at 1:15 p.m. before U.S. District Court Judge William P. Dimitrouleas. Sentencing for Mackey and Incandela has been scheduled for Nov. 3. At sentencing, the defendants face a maximum statutory term 30 years in prison. The remaining defendant, Marcos Echeverria, is scheduled to appear in court on Aug. 10. (usdojprsrel88311)
MORAL
That is one way to commit reverse mortgage fraud. There are at least two others of which I am aware and I am certain the FBI is investigating those.
IDAHO MORTGAGE FRAUDSTER SENTENCED TO 15 MONTHS IN FEDERAL PRISON
FACTS
On July 11, Melody C. Redondo received 15 months in federal prison followed by five years of supervised release for making a false statement to a financial institution. U.S. District Judge B. Lynn Winmill also ordered Redondo to pay $333,403.26 in restitution and perform 80 hours of community service. She had pled guilty to the charge on Feb. 15.
Redondo submitted an application for a $200,000 home equity line of credit from a financial institution. She admitted that she provided false financial information in order to obtain the line of credit. Her husband Paul Redondo pleaded guilty to misdemeanor theft from a financial institution. He was sentenced on May 4 to three years' probation, three months home detention, 80 hours of community service, and ordered to pay $101,459 in restitution. (usatttyid71111)
MORAL
She gets the felony conviction and he gets the misdemeanor. She gets time and he gets to go home. Makes you wonder who the “leader of the band” was.
OREGON MORTGAGE BROKER SENTENCED TO 15 MONTHS IN FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
On Aug, 2, Del Barber Jr. was sentenced by U.S. District Court Judge Michael R. Hogan to 15 months in prison for mortgage fraud and health care fraud and was ordered to pay over $200,000 in restitution to the victims of his frauds.
In November 2009, Barber and 12 other individuals were indicted on a variety of bank and loan fraud charges arising out of the collapse of Desert Sun Development a company previously headquartered in Bend. Barber, a licensed mortgage broker at the time, and the others charged in the indictments caused financial institutions to lose more than $19 million. On June 15, 2010, Barber pled guilty to conspiracy to commit bank fraud, loan application fraud, and wire fraud. Barber admitted to preparing and submitting a false loan application for a DSD employee trying to buy a DSD-built home. The bank foreclosed on the property because the borrowers were unqualified and failed to make payments. Barber is the first of several defendants who have pled guilty in the DSD-related cases to be sentenced.
While on pretrial release for his mortgage fraud-related charges, Barber committed a new federal offense, health care fraud. According to court documents, Barber, after letting his medical insurance lapse, attempted to fraudulently reinstate his medical insurance by faxing his insurance provider a fraudulent letter and check, claiming that he had made his payments and that his insurance had not lapsed. After his claim for reinstatement was denied, defendant engaged in a pattern of harassment and fraud, including making threatening phone calls and harassing visits to his insurance provider, submitting additional fraudulent documents to his insurance provider, and filing a frivolous lawsuit against his insurance provider in state court. (usattyor8211)
MORAL
I have a friend that likes the expression “felony stupid” which I have adopted. Mr. Barber is on bail for a federal offense and goes out and commits another one while on bail! I would say that is felony stupid.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
