FACTS
The government is proceeding with a vengeance in this attorney's opinion to prosecute fraud and to recover money where failed banks still had loans in their portfolio at the time of the failure. The FDIC “letters of inquiry,” subpoenas and lawsuits are just starting and I believe will escalate. The reason for this belief? The government is using private law firms for the most part in chasing the problems. You will note the letters indicate the delegation of authority if you have received one.
MORAL
There are seven we are aware of in California alone and we are receiving calls from others in other states about this same issue. If you have received any of the above you should not ignore it. Contact your counsel. If you do not have one you may give me a call.
Meanwhile, the FDIC closed seven more banks as of Oct. 22. Now why should you, a lender or broker or loan officer or borrower be concerned with bank closures at this time? ANSWER: You should not be concerned unless you have a mortgage loan that is still part of the portfolio of any of those banks in addition to Countrywide, Downey S&L, Indymac and several others. In that case you may find yourselves getting served with and investigative subpoena sometime in the next two year period or so. The FDIC is retaining outside legal counsel and giving them the authority to investigate lenders, brokers, loan officers and borrowers where an internal audit by FDIC may indicate the loan has “issues” with the correctness of the information contained in the file.
A REMINDER ABOUT THE PROPOSED AMENDMENT TO TILA (REG Z)
FACTS
The Federal Reserve Board proposes to amend Regulation Z, which implements the Truth in Lending Act, and the staff commentary to the regulation, as part of TILA's rules for home-secured credit. This proposal would revise the rules for the consumer's right to rescind certain open-end and closed-end loan secured by the consumer's principal dwelling. In addition, the proposal contains revisions to the RULES FOR DETERMINING WHEN A MODIFICATION OF AN EXISTING CLOSED-END MORTGAGE LOAN SECURED BY REAL PROPERTY OR A DWELLING IS A NEW TRANSACTION REQUIRING NEW disclosures. The proposal would amend the rules for determining whether a closed-end loan secured by the consumer's principal dwelling is a “higher-priced” mortgage loan subject to the special protections in § 226.35. The proposal would provide consumers with a right to a refund of fees imposed during the three business days following the consumer's receipt of early disclosures for closed-end loans secured by real property or a dwelling.
The proposal also would amend the disclosure rules for open- and closed-end reverse mortgages. In addition, the proposal would prohibit certain unfair acts or practices for reverse mortgages. A creditor would be prohibited from conditioning a reverse mortgage on the consumer's purchase of another financial or insurance product such as an annuity, and a creditor could not extend a reverse mortgage unless the consumer has obtained counseling. The proposal also would amend the rules for reverse mortgage advertising. Comments must be received on or before Dec. 23. (75 fr 58539 9-24-10)
MORAL
If you are a lender then read this in total and be aware of the proposed change. When it comes about it will affect your disclosures. The rule will take effect at some point after Dec. 23. Nice Christmas present, another change to memorize.
APPRAISAL INDEPENDENCE ADDED TO TILA
On Oct. 28, the Federal Reserve Board published an interim final rule pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act to implement the appraisal independence provisions added to the Truth In Lending Act. The interim rule replaces the Home Valuation Code of Conduct. Comments are due on or before Dec. 27.
Both open-end and closed-end loans secured by a consumer’s principal dwelling are subject to the interim rule. A creditor or any person that provides “settlement services” (as defined under RESPA) is subject to the interim rule as a “covered person.” The consumer in a transaction, a person secondarily liable for the transaction (e.g., guarantor), and a person residing in a dwelling are not covered persons.
Unlike HVCC, which focused primarily on a creditor’s improper influence on an appraiser, these provisions also impose liability on persons other than the creditor and expressly prohibit an appraiser from misrepresenting the value of a property.
The interim rule is effective Dec. 27. Compliance is mandatory April 1, 2011. Reg. Z’s current appraisal independence rules remain effective until March 31, 2011. Compliance with the new rules will be deemed compliance with the current Regulation Z provisions.
MORAL
This is a summary of a summary prepared by Weiner, Brodsky, Sidman, Kider PC. For a complete analysis, you may contact them directly. Any errors in the above are mine not those of Weiner, Brodsky.
CALIFORNIA MAN PLEADS GUILTY TO MORTGAGE FRAUD AND GETS 15 YEARS IN FEDERAL PRISON
FACTS
On Oct. 22, JUAN RANGEL of Downey, Calif. agreed to plead guilty to federal fraud and money laundering charges, admitting that he ran two fraudulent operations—a Ponzi scheme that took in $30 million from more than 300 victims and a mortgage fraud scheme that preyed on homeowners by stealing the equity from their homes and secretly taking title to their properties.
In the plea agreement, FEDERAL PROSECUTORS AND RANGEL ASK THE COURT TO IMPOSE A SENTENCE OF 15 YEARS IN PRISON.
Rangel and his company, the Commerce-based FINANCIAL PLUS INVESTMENTS, recruited new investors through Spanish-language newspapers and magazines, as well as in radio advertisements and infomercials broadcast on television. Rangel and Financial Plus promised to pay investors guaranteed returns of 60% each year out of the profits from Financial Plus’ real estate investments and lending business. However, Rangel admitted in the plea agreement that Financial Plus did not make any actual profits from real estate or lending. Rangel instead used the victims’ money to make Ponzi payments to other investors and for his own personal use, including the monthly mortgage payments on his $3 million home and monthly payments for his Lamborghini sports car.
In the plea agreement, Rangel also admitted that he and others operated a mortgage fraud scheme that targeted Latino homeowners at risk of losing their homes by offering them help to avoid foreclosure. Rather than assisting the distressed homeowners, however, Rangel took titles to their homes and drained the remaining equity out of the properties. As part of this scheme, Rangel arranged to sell the homeowners’ properties, usually without their knowledge, to third-party straw buyers. He then applied for loans in the straw buyers’ names related to these supposed purchases, and used a variety of falsified documents to ensure that the fraudulent loans were approved. Rangel admitted that the scheme caused mortgage lenders to fund more than $10 million in fraudulent loans.
Rangel will face a statutory maximum sentence of 30 years in federal prison. Although the parties will recommend a sentence of 15 years, Judge Otero will make the final determination as to the appropriate sentence in the case.
A federal grand jury indicted Rangel and also charged JAVIER JUANCHI of Sherman Oaks, a vice president at Financial Plus, and PABLO ARAQUE OF DOWNEY, who owns the Downey-based tax preparation and bookkeeping company A-ONE TAX PROS in relation to the mortgage fraud. They are currently scheduled to go to trial before Judge Otero on Nov. 23. (usattycdca102510)
MORAL
FIFTEEN YEARS AFTER PLEADING GUILTY! AND REMEMBER, THERE IS NO PAROLE IN THE FEDERAL SYSTEM.
CALIFORNIA MAN CHARGED IN OREGON WITH MORTGAGE FRAUD RELATED TO HARD MONEY LOANS
FACTS
On Oct. 26, LOUIS J. BORSTELMANN OF THOUSAND OAKS, CALIF., was charged with mail fraud, wire fraud and money laundering in connection with a Ponzi scheme that reached Florence, Ore.
According to the indictment, the defendant solicited approximately 100 individuals to invest in real estate through his company SUNBURST ASSOCIATES INC., A CALIFORNIA CORPORATION, and the investors lost more than $18 million. Reportedly, the defendant claimed to offer hard-money loans through his company that were secured by real estate deeds of trust. As alleged in the indictment, the defendant solicited individuals to invest in the deeds of trust by falsely promising high rates of return and a security interest in the property allegedly pledged to secure the investment.
As further contained in the indictment, defendant, to perpetuate the scheme, sent investors fraudulent investment materials, including the supposed deeds of trust. Based on the indictment, the alleged investments never existed, and defendant used new investor money to pay existing investment obligations. According to the indictment, defendant also spent investor money on personal items, including a car and a home. (usattyor102610)
MORAL
Considering a simple check of the DRE website would have shown his license and the company license expired back in 1996 and 1998 it kind of makes you wonder why no one checked the license?
IOWA WOMAN CHARGE WITH MORTGAGE FRAUD, FACES 476 YEARS IN PRISON
FACTS
On Oct. 28, TERESA HOFFERT, 59, FROM EMMETSBURG, IOWA, was charged with 13 counts of mail fraud, six counts of bank fraud, three counts of aggravated identity theft, and three counts of money laundering.
The indictment alleges that, between about the spring of 2005 and the summer of 2008, while acting as a real estate settlement agent, Hoffert fraudulently kept portions of sale or mortgage loan proceeds, rather than using the proceeds to pay off existing mortgage loans on the properties as she was required to do,
The indictment alleges that, in order to conceal her fraud, Hoffert caused original mortgage lenders to send statements and other bank correspondence to a post office box under her control. The indictment also alleges she attempted to conceal her fraud by making payments on existing mortgage loans. Hoffert allegedly used the account numbers and names of other persons without authority to do so.
If convicted on all charges, Hoffert faces a mandatory minimum sentence of TWO YEARS’ IMPRISONMENT AND A POSSIBLE MAXIMUM SENTENCE OF 476 YEARS’ IMPRISONMENT, A $6,250,000 FINE, $2,500 in special assessments, and 81 YEARS OF SUPERVISED RELEASE FOLLOWING ANY IMPRISONMENT. (usattydnia102810)
MORAL
As usual the government went back five years to get to the fraud. If any of you think the government is not serious about putting mortgage fraud defendants in prison read this carefully.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
