FACTS
The Federal Reserve Board announced that it does not expect to finalize three pending rulemakings DOES under Regulation Z, which implements the Truth in Lending Act, prior to the transfer of authority for such rulemakings to the Consumer Financial Protection Bureau.
The first phase of the review consisted of two proposals issued in August 2009, which would have reformed the consumer disclosures under TILA for closed-end mortgage loans and home equity lines of credit (Docket Nos. R-1366 and R-1367).
The third proposal was issued in September 2010 (Docket No. R-1390). This proposal included changes to the disclosures consumers receive to explain their right to rescind certain loans and would have clarified the responsibilities of the creditor if a consumer exercises this rescission right. The September 2010 proposal also included changes to the disclosures for reverse mortgages, proposed new disclosures for loan modifications, restrictions on certain advertising practices and sales practices for reverse mortgages, and changes to the disclosure obligations of loan servicers. (frbpr2111)
MORAL
None of these have anything to do with the Dodd Frank Act that still is currently set to go into effect on April 1. There are indications the date may be slipped. The most prevalent one in this attorney's opinion being the letter from the SBA to the FRB stating apparent noncompliance with the small business laws and regulations below. Other than that, the new rules regarding compensation of loan officers is still scheduled for April 1.
SBA SEEKS DELAY ON IMPLEMENTATION OF THE MAXIMUM MORTGAGE LOAN OFFICER COMPENSATION
FACTS
The Small Business Administration officially asked the Federal Reserve to postpone the April 1 implementation date of its loan officer compensation rule, saying the central bank did not provide "sufficient" or "proper" guidance for small mortgage firms and loan brokers to comply with the new requirements.
The Fed recently issued written guidance on the Truth in Lending Act Loan Originator rule designed to ban compensation arrangements that would tempt Loan Originators and brokers to steer consumers into higher cost loans. The SBA's Office of Advocacy says the four-page guidance issued by the Fed does not "include a description of actions needed" to meet the requirements of the rule, as mandated by the Small Business Regulatory Enforcement Fairness Act.
"Small entities have advised Advocacy that the guidance answers almost none of the questions that the industry has about the rule and view it as simply a summary of a complex issue and not guidance on how to comply with the requirements of the rule," says SBA chief counsel of Advocacy Winslow Sargeant.
Sargeant suggests the Office of Advocacy arrange a meeting between small mortgage firms and Fed officials to discuss areas of the compensation rule that need more specific guidance.
The SBA chief counsel wrote in his Feb. 1 letter to the FRB that, "Because the effective date of the rule is rapidly approaching at a time that industry does not feel as though it has workable guidance, Advocacy once again encourages the Board to postpone the implementation date for small entities.
"A delay to educate small entities on the proper implementation of the requirements of the rule will benefit the small entities and the consumers who utilize their services," he added. (on2211)
MORAL
Maybe the FRB will postpone the April 1, date and maybe they will not. But since the SBA put in a formal request, the odds are the date will be postponed. So mortgage originators will still be able to make a decent living. We will keep you informed.
CALIFORNIA MAN PLEADS GUILTY TO MORTGAGE FRAUD
FACTS
Shane Burreson of Orland, Calif. pleaded guilty to charges of mail fraud and money laundering in connection with a multi-million dollar mortgage scheme that operated in Chico between 2006 and 2008. He operated Nor Cal Investment Instruments along with co-conspirator Garrett Griffith Gililland, who has been indicted on similar charges and awaits trial.
Burreson, Gililland and others allegedly recruited straw buyers to purchase new homes in Chico at artificially inflated prices. Loans were allegedly obtained on the higher amounts, and the difference, distributed at the close of escrow, was deposited into to the accounts of several companies Gililland had set up.
Chico homebuilder Tony Symmes pleaded guilty in 2010 to conspiring with Gililland to sell more than 60 of his homes in Chico subdivisions to straw buyers. Since the plea, Symmes has reportedly paid about $4 million in restitution. Sentencing in the Symmes case is pending.
Burreson, who formerly operated a sports nutrition store in Chico, was the first defendant prosecuted under an amended indictment which includes Gililland, his wife, Nicole Magpusao, and William E. Baker, a Chico area homebuilder.
In addition to a possible term in federal prison, Burreson will be ordered to forfeit approximately $41,000, an amount equal to proceeds derived from two counts in the indictment. A sentencing date for Burreson is pending.
CONNECTICUT MAN PLEADS GUILTY TO MORTGAGE FRAUD SCHEME
FACTS
On Feb. 1, Syed A. Babar, also known as “Ali” and “Asad,” of New London, pleaded guilty in Hartford to multiple federal charges related to his involvement in an extensive mortgage fraud scheme.
On July 28, 2010, Babar was charged in a second superseding indictment with one count of conspiracy, eight counts of wire fraud, one count of mail fraud, and four counts of making false statements to the government. Babar pleaded guilty to each of the 14 counts.
Between February 2007 and April 2010, Babar and others engaged in a scheme to obtain millions of dollars in residential real estate loans, including loans insured by the FHA, through the use of sham sales contracts, false loan applications and fraudulent property appraisals. Babar was the de factor leader and organizer of the conspiracy. In pleading guilty, Babar admitted that he and others recruited and paid straw purchasers to nominally purchase homes. Babar and his co-conspirators then directed the straw purchasers to enter into sales contracts with the sellers of homes for a price higher than the actual price that the seller would receive. Members of the conspiracy submitted false documentation in connection with loan applications that were submitted, including fraudulent appraisals of the properties being purchased in order to justify the inflated sales price and the loan amount being sought to fund each purchase. Babar and others also created a fictitious construction company called “Sheda Telle Construction LLC” in order to divert fraud proceeds to it and, in some cases, to falsely justify the artificially inflated sales price of houses based on renovations purportedly made to the property that, in fact, did not occur. Babar and his co-conspirators then split the fraud proceeds. Contrary to the representations made on the loan applications, the straw purchasers never occupied the houses as their primary residences. They defaulted on the loans they obtained and let the houses go into foreclosure.
It is believed that Babar and his co-conspirators conducted this scheme on at least 30 properties in Connecticut. As a result, various lenders suffered total losses of at least $3.2 million.
Judge Thompson has scheduled sentencing for June 27, at which time Babar faces a maximum term of imprisonment of five years on the conspiracy count, a maximum term of imprisonment of 20 years on each count of wire fraud and mail fraud, and a maximum term of imprisonment of five years on each count of making false statements.
Babar has been detained since his arrest on May 12, 2010. U.S. Attorney Fein stated that the investigation is ongoing. (usattyct2111)
MORAL
The government went back four years to get to Babar. The government is still looking at other people that they believe were involved. Hence the ongoing investigation. And very important, it is this attorneys’ opinion that Babar was offered a plea bargain and turned it down. Maybe twice. The reason for this opinion is the fact there is a second superseding indictment which I have found to generally mean a deal was offered, turned down and the government then adds on more charges it found against the same person. So if the defendant turns down a potential plea agreement, that defendant should be aware that a superseding indictment is likely to be filed adding charges and increasing the potential risk of prison time if not additional prison time. Such has been my experience and my legal research.
ARIZONA LOAN OFFICER AND REAL ESTATE AGENT BOTH INDICTED IN A MORTGAGE FRAUD CONSPIRACY
FACTS
A federal grand jury in Tucson returned a six-count indictment against Scott Tyson and Susan Levy, both of Tucson, Ariz. The indictment charges the defendants with wire fraud and conspiracy to commit wire fraud.
According to the indictment, Levy, a licensed Arizona real estate agent, received approximately $1.2 million dollars in loans to purchase multiple real estate properties between February, 2006 and July, 2007. In obtaining her loans, Levy failed to disclose that she had purchased other properties during this time period and/or understated her liabilities, thus constituting a material omission of fact submitted to the lenders. Scott Tyson was the loan officer used by Levy in each of these transactions.
A conviction for conspiracy to commit wire fraud and wire fraud carries a maximum penalty of 20 years’ imprisonment, a $250,000 fine or both for each count. (usattyaz2111)
MORAL
As you can see, the federal prosecutors are not only going forward with prosecution, they are increasing the pressure.
CALIFORNIA REAL ESTATE EXECUTIVE PLEADS GUILTY IN SACRAMENTO TO BID RIGGING AT PUBLIC FORECLOSURE AUCTIONS
FACTS
On Feb. 4, Richard W. Northcutt, a real estate executive, pleaded guilty in U.S. District Court in Sacramento, Calif., to conspiring to rig bids and commit mail fraud at public real estate foreclosure auctions held in San Joaquin County.
He pleaded guilty to conspiring with a group of real estate speculators who agreed not to bid against each other at certain public real estate foreclosure auctions in San Joaquin County. The primary purpose of the conspiracy was to suppress and restrain competition and to obtain selected real estate offered at San Joaquin County public foreclosure auctions at non-competitive prices, the department said in court papers.
According to the court documents, after the conspirators' designated bidder bought a property at a public auction, they would hold a second, private auction, at which each participating conspirator would bid the amount above the public auction price he or she was willing to pay. The conspirator who bid the highest amount at the end of the private auction won the property. The difference between the price at the public auction and that at the second auction was the group's illicit profit, and it was divided among the conspirators in payoffs. According to his plea agreement, Northcutt participated in the scheme from September 2008 until October 2009.
To date, including Northcutt, four individuals have pleaded guilty in U.S. District Court for the Eastern District of California in connection with this investigation. On April 16, 2010, Anthony B. Ghio pleaded guilty to participating in a conspiracy to rig bids at public foreclosure auctions held in San Joaquin County. On June 24, 2010, John R. Vanzetti and Theodore B. Hutz also pleaded guilty in Sacramento to participating in the conspiracy.
Northcutt pleaded guilty to bid rigging, a violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine. Northcutt also pleaded guilty to conspiracy to commit mail fraud, which carries a maximum sentence of 30 years in prison and a $1 million fine. (usattyedca2411)
MORAL
What is more interesting to me is that any competent attorney could have told him it violated state law to begin with. That would have cost them several hundred dollars. Now it can cost them over $1 million aside from the felony convictions, loss of license, loss of right to vote and the inability to find good work anywhere due to the convictions. The state law (California Civil Code Section 2924h) only has a $10,000 fine and/or one year in the county jail or both for bid rigging.
CALIFORNIA FEDERAL COURT FINDS WASHINGTON STATE MAN GUILTY IN FORECLOSURE RESCUE SCHEME; FACES 180 YEARS IN FEDERAL PRISON
FACTS
On Jan. 21, Jeff McGrue of Tacoma, Wash., was found guilty of federal fraud charges for running a scheme that defrauded the owners of distressed homes by promising to delay or prevent foreclosure through a program that supposedly used notes backed by Treasury bonds to pay off mortgages.
When he is sentenced, McGrue will face a statutory maximum penalty of 180 years in federal prison. United States District Judge Otis D. Wright II, who presided over the trial, has not yet scheduled a sentencing date.
McGrue orchestrated the foreclosure rescue scheme from the fall of 2007 through the fall of 2008 through a company he called Gateway International. McGrue worked with two others—Gerald Guidry, who owned a company called My Debt Solutions, and Ronald Morgan, who owned a company called Omnipoint—to defraud homeowners by promising to delay or prevent foreclosures and to pay-off delinquent mortgages in exchange for the homeowners making payments and transferring title to Gateway International.
McGrue and the others identified homeowners facing foreclosure or who were "upside-down" on their mortgages. Relying on a network of "consultants," many of whom were real estate agents, McGrue recruited these homeowners into his "Gateway Program." Through the Gateway Program, McGrue and the others falsely told homeowners that, if they paid an enrollment fee and monthly rent and signed over title of their homes to Gateway, McGrue would use "bonded promissory notes" purportedly drawn on a U.S. Treasury Department account to pay off their mortgages, thereby stopping foreclosure proceedings.
During the course of the scheme, McGrue sent more than $50 million worth of the bogus notes to lenders. The homeowners were falsely told that lenders were legally required to accept the notes, that they would be able to buy their homes back from Gateway at a discount, and that they would receive up to $25,000, even if they chose not to re-purchase their houses.
McGrue did not own any bonds and did not have a U.S. Treasury Department account. Nor could he have the type of account described to homeowners because the Treasury Department does not maintain accounts that can be used to make payments to third parties.
McGrue and his co-schemers enrolled at least 250 victims in the "Gateway Program," but McGrue did not save a single home. McGrue collected at least $800,000 in the form of enrollment fees and rent from these victims. The evidence at trial showed that McGrue signed bogus documents to make it appear the outstanding mortgages had been paid off so he could re-sell the properties.
Guidry pleaded guilty last year to conspiracy and making false statements. He faces a statutory maximum sentence of 10 years in federal prison when he is sentenced by Judge Wright on April 11.
Morgan pleaded guilty last year to conspiracy. He faces a statutory maximum sentence of five years when he is sentenced by Judge Wright on March 2.
A fourth defendant charged as a result of the investigation, John-Pierre Rivera, pleaded guilty last year to tax evasion. Rivera is scheduled to be sentenced by Judge Wright on Feb. 28, at which time he faces a statutory maximum sentence of five years in federal prison. (usattycdca13411)
MORAL
Anyone sound familiar? Anyone do foreclosure consultant work to stop the foreclosures by charging the homeowner and not performing? See your attorney if in doubt.
LAS VEGAS WOMAN SENTENCED TO FEDERAL PRISON FOR MORTGAGE FRAUD
FACTS
On Feb. 2, Gail Bilyeu of Las Vegas, who pleaded guilty to submitting six fraudulent mortgage loan applications during 2004 to 2005, was sentenced by Judge Kent J. Dawson to 27 months in prison, five years of supervised release, and was ordered to pay approximately $1 million in restitution to five federally insured financial institutions.
Bilyeu pleaded guilty in June 2010 to one count of conspiracy to commit wire fraud and six counts of wire fraud. She was indicted in November 2009 along with co-defendant Malcolm Childress, who also pleaded guilty to conspiracy to commit wire fraud. Childress was sentenced on Sept. 29, 2010, to 15 months in prison, five years of supervised release, and was ordered to pay $964,250 in restitution and to forfeit $2.6 million to the government.
From about October 2004 to December 2005, Bilyeu and Childress participated in a conspiracy to submit fraudulent mortgage loan applications to financial institutions. Bilyeu recruited and paid straw buyers to purchase homes in Las Vegas. These straw buyers did not intend to occupy the homes. Bilyeu caused false information to be included on the straw buyers’ loan applications, so the straw buyers would qualify for loans for which they would not otherwise qualify. Bilyeu also caused the loan applications to be forwarded to the financial institutions for funding of the mortgages. In total, six mortgage loan applications were sent to financial institutions by Bilyeu and Childress. The loans totaled about $2.6 million, and were used to purchase six homes. The cases were investigated by the FBI and prosecuted by Assistant United States Attorney Brian Pugh. (usattynv2211)
MORAL
The government went back seven years to 2004 and came forward to put these loan officers away in a federal prison. If you have loans you did in 2004 to the present that are questionable see your attorney.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
