FACTS
On Jan. 28, Federal Housing Administration Commissioner David H. Stevens extended the temporary waiver of the agency's "anti-flipping rule." The extension is intended to accelerate the resale of foreclosed upon homes in neighborhoods struggling to overcome possible property abandonment and blight.
FHA has posted a notice extending this waiver through the remainder of 2011. This action will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. Since the original waiver went into effect last February, FHA has insured more than 21,000 mortgages worth over $3.6 billion on properties resold within 90 days of acquisition."
The extension is effective through Dec. 31, unless otherwise extended or withdrawn by FHA. All other terms of the waiver will remain the same, and HUD continues to invite public comment on it. The waiver contains strict conditions and guidelines to assure that predatory practices are not allowed. This waiver continues to be limited to those sales meeting the following general conditions:
All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction. In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions. The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage for purchase program. (hud.gov12811)
MORAL
Go buy, renovate and sell.
CA DRE REQUIRES INDEPENDENT CONTRACT LOAN PROCESSORS UNDERWRITERS TO BE LICENSED AS A REAL ESTATE BROKER AND HAVE THE NMLS&R UNIQUE IDENTIFIER
FACTS
Any independent contract loan processor or independent underwriter that processes or underwrites loans for more than one broker must have a real estate license as a broker and the NMLS&R unique identifier. If you are doing it for one broker only, an endorsement is not required as long as the employing broker supervises your activities and you are not otherwise performing acts that require a real estate license. (drewebsite12711; b&pc §§ 10166.01(f),10166.03(c).)
An independent contractor may not engage in residential mortgage loan origination activities as a loan processor or underwriter unless such person is a state-licensed loan originator. (12usc5103(b)(2))(12usc5101-5116)
MORAL
So it would appear even if you were doing it for one broker only, you must be a W-2 employee under the United States Code.
FURTHER REMINDERS OF REPORTS REQUIRED BY DRE
FACTS
Every real estate licensee that makes, arranges or services loans secured by real property, single-family 1-4 units must report to the DRE on form RE866 within 30 days of commencing such activity. If you terminate doing such loans you must submit another RE866 updating the information. Penalty for failure to comply is $50/day up to 30 days and $100/day thereafter up to a maximum of $10,000.
MORAL
Unless you have a spare $10,000 floating around be sure to comply. These are merely reminders to those that are going to do loans now. Since you now register, the DRE is more likely to audit you because it has an updated list of who is and who is not doing mortgage loans in any form from the RE 866.
RECENTLY MANY OF YOU HAVE BEEN ASKING ME ABOUT THE DRE MORTGAGE CALL REPORTS COMING DUE
FACTS
Q. What are Call Reports?
A. Call Reports are quarterly reports of loan activity and annual reports of financial condition submitted to the NMLS.
Q. Who will submit Call Reports?
A. MLO Brokers (sole proprietors and corporations) will submit Call Reports.
Q. What information will be required in the Call Reports?
A. Loan information from all of the broker’s MLOs will be reported. Financial Condition information will also be required.
Q. Why are there two types of Mortgage Call Reports? There are Standard Mortgage Call Reports and Extended Mortgage Call Reports.
A. The Extended Mortgage Call Reports must be submitted by companies approved by Fannie Mae, Freddie Mac or Ginnie Mae. The Standard Mortgage Call Reports must be submitted by all other companies.
Q. What is the difference between the two Mortgage Call Reports?
A. The information provided by the brokers will be different in each of the reports. See samples of the reports and information on the NMLS website: Mortgage Call Reports (compliments of the California Department of Real Estate. This is a paraphrase and the DRE is not responsible for any potential errors or omissions.)
MORAL
Update your audit procedures and the DRE audit manual accordingly.
CALIFORNIA HOMEOWNER FRAUD LAWSUIT AGAINST U.S. BANK CAN GO FORWARD FOR FAILURE TO GIVE LOAN MODIFICATION
FACTS
U.S. Bank is legally bound by its promise to try to work out a loan modification with a homeowner to avoid foreclosure, a state appeals court has ruled.
The decision by the Second District Court of Appeal in Los Angeles involved a homeowner who said she refrained from protecting her home in a Bankruptcy Court filing after the bank promised to negotiate new loan terms, then foreclosed and evicted her. The court refused to undo the foreclosure but said the owner, Claudia Aceves, could sue the bank for fraud. The ruling should also help financially distressed homeowners who make several months of reduced payments in reliance on a bank's promise to modify their mortgages.
"The homeowner has no choice but to work with the bank," Nick Alden said. Typically in such cases, he said, the lender would reject the final payment as insufficient, declare the borrower unqualified for a loan, and foreclose.
Aceves took out a 30-year, $845,000 adjustable-rate loan on her Los Angeles home in April 2006 and could no longer afford the monthly payments two years later, the court said. The lender filed a notice of foreclosure that was halted when Aceves filed for bankruptcy. She intended to convert her case to a Chapter 13 bankruptcy filing, which would have let her keep the home by paying what she owed over an extended period, but said U.S. Bank told her it would work with her to reinstate and modify the loan if she withdrew from bankruptcy. Five days after she dropped her bankruptcy case in December 2008, Aceves said, U.S. Bank, without contacting her, scheduled her home for public auction a month later. She said the bank's loan servicer called her lawyer the day before the sale and orally proposed a new loan with higher payments. The bank bought the home at the foreclosure sale and filed an eviction notice two months later.
A judge dismissed Aceves' suit against the bank but the appeals court revived it, saying a lender who falsely promises to help a homeowner prevent foreclosure could be sued for fraud.
Aceves "could have reasonably relied on the bank's promise to work out a loan reinstatement and modification if she did not seek relief" under the bankruptcy law, the court said in a 3-0 ruling. The bank argued that Aceves acted in bad faith by seeking refuge from foreclosure in bankruptcy proceedings. But the court said a Chapter 13 bankruptcy filing is a legitimate way for a borrower to reinstate a home loan and does not violate the lender's rights. Because a bankruptcy judge can't modify a long-term mortgage by reducing the payments or extending the life of the loan, the court said, Aceves had a reason to rely on the bank's offer to negotiate more favorable terms. (sfchron12911)
MORAL
Bankruptcy is an option to stopping foreclosures and can even make the second mortgage go away as an unsecured debt under the right circumstances. If you have questions give us a call.
WASHINGTON STATE EXPLAINS NEED FOR ITS ANNUAL REPORT AND THE NMLS CALL REPORT AND BOTH ARE REQUIRED FOR NOW
FACTS
DFI Mortgage Broker Annual Report & the Mortgage Call Report
Licensees will be receiving communication from DFI about the 2010 Mortgage Broker Annual Report and from the NMLS about the new Mortgage Call Report. While the Mortgage Call Report will eventually replace the Mortgage Broker Annual Report, that is not the case yet.
Here is a quick breakdown of each report and your responsibilities as Mortgage Broker licensees:
DFI 2010 Mortgage Broker Annual Report
This one page document, provided by DFI, is filed directly with DFI.
The report covers business conducted from Jan. 1, 2010 through Dec. 31, 2010.
The report must be filed by Mortgage Brokers licensed in 2010, even if the license wasn't renewed for 2011.
The deadline to file the report is March 31.
THE MORTGAGE CALL REPORT
This multiple page report is filed in the NMLS, either submitted manually or through an upload option.
The report is quarterly, so the first report is for business conducted from Jan. 1 through March 31.
The report must be filed by Mortgage Brokers holding a license in 2011.
The deadline to file the report is within 45 days of the end of each quarter. NOTE: The NMLS functionality for filing the Call Report is expected in April 2011.
For more information on the Call Report, please click on the
What should I do right now?
Prepare the information needed to complete the Mortgage Broker Annual Report
Review the
WISCONSIN LAWYER SENTENCED FOR MORTGAGE FRAUD IN MINNESOTA
FACTS
On Jan. 25, John Eric Fischer of Hudson, Wis., was sentenced to 50 months in prison for stealing more than $3 million in a mortgage fraud scheme. Fischer was ordered to pay more than $3 million in restitution.
Fischer admitted that from 2006 through May 2009, he orchestrated a scheme to divert funds from the escrow account at Real Source Title, a company he jointly owned and managed. The company, which had offices in Mahtomedi and Burnsville as well as in Illinois and Hudson, routinely accepted wire transfers and checks from buyers and lenders. Those funds were to be held in escrow for the sole purpose of closing residential real estate transactions. Fischer, however, used the diverted funds for personal benefit.
To further his scheme, Fischer represented to buyers, lenders, underwriters, and others that the money deposited into the company’s escrow account was, in fact, used only to close real estate transactions. He made those representations by producing and mailing false HUD-1 settlement statements to people of interest. In truth, however, Fischer regularly withdrew escrow-account money to pay for personal and business expenses as well as to fund prior company real estate transactions. In 2008, for example, Fischer invested approximately $500,000 in escrow dollars into the opening and operation of a restaurant.
Between 2006 and May of 2009, Fischer diverted approximately $3 million from the escrow account at Real Source Title; and by May 2009, the account was depleted and unable to fund 15 loans. As a result, buyers, sellers, lenders, underwriters, and others suffered significant financial loss. (usattymn12511)
MORAL
Over four years in prison. Loss of attorney license. Money gone. Where is the benefit?
TEXAS ATTORNEY, TITLE COMPANY EMPLOYEE AND BUILDER FOUND GUILTY OF WIRE FRAUD AND MONEY LAUNDERING IN A MULTI-MILLION DOLLAR MORTGAGE FRAUD SCHEME
FACTS
On Jan. 26, a jury found Vincent Wallace Aldridge, a former fee attorney for First Southwestern Title Co. and attorney for Aldridge and Associates, along with Tori Elyse Aldridge, a former First Southwestern Title employee, and Gilbert Barry Isgar, a former co-owner of Waterford Homes, guilty of charges of wire fraud and money laundering in a scheme to defraud residential mortgage lenders of more than $3.7 million in loans in connection with home purchases in the Houston area.
The Aldridges were found guilty of 19 counts which included conspiracy to commit wire and mail fraud, wire fraud, conspiracy to commit money laundering and money laundering charges. Isgar was found guilty of 13 counts which included conspiracy to commit wire and mail fraud, wire fraud and conspiracy to commit money laundering.
Both of the Aldridges and Isgar conspired to devise and execute a scheme during 2004 and 2005 to receive proceeds from real estate transactions based upon materially fraudulent information that was intentionally supplied to at least four lending institutions as the basis for an agreement between the lending institutions and borrowers. Vincent Aldridge lured borrowers by representing the scheme as an investment opportunity.
For the use of their credit to obtain mortgage loans, the borrowers were promised $10,000 after the closing of their respective property and that the property would be sold after a year for a profit. Once a borrower agreed to the deal, then Vincent Aldridge and Tori Aldridge, acting as an escrow officer and as a loan processor, met with the borrower to obtain the necessary personal identifying information to complete the borrower’s lending package.
Prior to the Aldridges submitting the lending packages to the lending institutions, the Aldridges modified the lending package to enhance the borrower’s ability to qualify for the requested loan. These enhancements included fraudulently overstating the borrower’s income, misrepresenting the borrower’s principal residence as rental property and misrepresenting the purchase property as the principal residence. The mortgage loans totaled approximately $3,700,000. Each property sold in amounts between $344,000 and $360,000 and was funded to First Southwestern Title by wire.
As a part of the scheme, Isgar, co-owner of Waterford Custom Homes, inflated the sales price of the properties to be purchased by the aforementioned recruited borrowers. As a part of the agreement between the Aldridges and Isgar, Isgar signed disbursement authorizations for attorney's fees and additional contractor fees on brand new homes for amounts of $60,000 to more than $80,000. These documents were provided to First Southwestern Title, which was controlled by the Aldridges. These disbursement authorizations were not provided to the lender and were not listed on the HUD Settlement Statement. The disbursements for additional attorney’s fees were in addition to the attorney’s fees stated on the attorney fee line in HUD Settlement Statement.
Once the loans were funded to the title company, the Aldridges caused several checks to be drawn on the account of the title company, each totaling amounts of $60,000 to more than $80,000, to Aldridge & Associates IOLTA bank account. The checks totaled approximately $442,089 and represented a portion of the illicit proceeds obtained through the mortgage fraud scheme. On one occasion, Isgar wired approximately $81,000 back to Vincent Aldridge’s account after he received the funds from the closing. The total amount of the money laundering was more than $500,000.
The case is set for sentencing on May 25. The maximum penalty for each wire fraud count is 20 years in prison as well as substantial fines. The maximum penalty for each money laundering count is 10 years in prison. A conviction for money laundering carries the most significant fine of $250,000 or twice the amount of the criminally derived property, whichever is greater. (usattysdtx12611)
MORAL
This is the week for attorney convictions. Notice how the investigation went back to loans that occurred seven years ago in 2004?
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
