CFPB UPDATES RULES FOR HIGHER PRICED MORTGAGE LOAN ESCROW ACCOUNTS
FACTS
The Consumer Financial Protection Bureau issued amendments to the final rule on mandatory escrow accounts. The revisions lengthen the time for mandatory escrow account establishment for a higher-priced mortgage loan that must be maintained; establishes an exemption from the escrow requirement for certain creditors that operate predominantly in "rural" or "underserved" areas; clarifies the determination method for the "rural" and "underserved" designations and keep in place certain existing protections for HPMLs until other similar provisions take effect in January 2014. This rule became effective on June 1.
MORAL
In other words, read the rule before you loan or you may weep after the loan when you try to get paid back.
CALIFORNIA BUSINESS PARTNERS INDICTED FOR RUNNING FORECLOSURE RESCUE OPERATION
FACTS
On May 28, an 11-count indicted was unsealed, charging Juan Curiel and Santiago Palacios were involved in a foreclosure rescue scheme.
The indictment alleges that Curiel and Palacios were the principal owners of Star Reliable Mortgage, a business in Bakersfield, Visalia, and Salinas, through which they offered prospective clients a home loan “elimination” service.
The defendants falsely represented to clients that the government had allocated to each of their Social Security accounts $1 million, which could be used to pay off their mortgages. The defendants also falsely represented to clients that they could own their homes “free and clear” by paying fees to defendants, who, in turn, would conduct forensic audits of the clients’ mortgage lenders’ files to uncover supposed fraud by the lenders.
According to the indictment, between August 2010 and October 2011, Curiel and Palacios charged clients an upfront fee for their services—ranging from $2,500 up to $4,500—as well as monthly fees. Curiel and Palacios then fraudulently recorded and mailed to the clients’ mortgage lenders deeds and re-conveyances supposedly replacing the lender-trustees with fictitious trusts affiliated with the defendants. On at least one occasion, Curiel fraudulently filed bankruptcy on behalf of a client. The scheme involved more than $2.5 million in losses to private homeowners and lending institutions.
If convicted, the defendants face a maximum statutory penalty for the conspiracy and mail fraud counts of 30 years in prison and a $1 million fine. The maximum penalty for bankruptcy fraud is five years in prison and a $250,000 fine. (usattyedca52813)
MORAL
Notice the fact the prosecutors went back to 2010 transactions to indict.
HEAD BROTHERS ARE FOUND GUILTY OF A NATIONWIDE FORECLOSURE RESCUE SCAM
FACTS
On May 30, after a nearly four-week trial, a federal jury in Sacramento returned guilty verdicts against Charles and Jeremy Michael Head. Both were convicted of conspiracy to commit mail fraud in connection with a nationwide foreclosure rescue scam. Charles Head was convicted of four counts of mail fraud, and Mike Head was convicted of two counts of mail fraud.
Between January 2004 and March 2006, the scheme netted more than $15 million in fraudulently obtained funds from scores of homeowners, many of whom were in California.
Through misrepresentations, fraud, and forgery, the defendants led the victims to complete transactions that substituted straw buyers for the victim homeowners on the titles of properties without the homeowners’ knowledge. These straw buyers were often friends and family members of defendants. Once the straw buyers were on title to the homes, the defendants applied for mortgages to extract the maximum available equity from the homes. The defendants then shared the proceeds of the ill-gotten equity and the “rent” that the victim homeowners paid them. Ultimately, the victim homeowners were left with no home, no equity, and with damaged credit ratings.
“Charles and Jeremy Michael Head knowingly exploited and victimized homeowners who feared the imminent loss of their homes to foreclosure,” said Acting Special Agent in Charge Manuel Alvarez, Jr. of the Sacramento Division of the Federal Bureau of Investigation (FBI).
Ten other defendants have pleaded guilty in this case, charges were dismissed against one, and three remaining defendants are set for trial on Nov. 4.
A second indictment, returned March 13, 2008, charges Charles Head and six other defendants, including three not charged in the first indictment, with operating an additional “equity-stripping” scheme that netted approximately $5.9 million in stolen equity from 68 homeowners nationwide. That indictment alleges that Charles Head revised the original scheme by recruiting strangers via the Internet to act as straw buyers. Under this new scheme, the indictment alleges, he received approximately 97% of the stolen equity. His “sales agents” and employees, and the other defendants, allegedly received the remaining 3% of equity. Trial in that case is scheduled for Sept. 9.
MORAL
The federal prosecutors are so upset over the loss of property to the home owners that notwithstanding the conviction already, one of the Head brothers is being tried on a second indictment which could mean up to 40 years in prison if convicted.
MINNESOTA REAL ESTATE AGENT GETS THREE YEARS IN PRISON FOR MORTGAGE FRAUD
FACTS
On May 29, in a St. Paul, Minnesota federal court, Robert Leo Rick was sentenced to three years in federal prison for his role in a mortgage fraud scheme that defrauded mortgage lenders out of at least $7 million on one count of conspiracy to commit mail and wire fraud.
Rick admitted that from 2005 through 2007, while employed as a real estate agent for Rick’s Realty, he worked with developers, builders, and investors seeking to “invest” in residential real estate. Rick admitted soliciting and conspiring with others to secure investors to purchase multiple residential properties, in transactions where those investors, or buyers, would receive undisclosed kickbacks from mortgage loan proceeds.
To generate the funds for the kickbacks, builders sold the homes at reduced prices, appraisers appraised the homes at inflated prices, and the mortgage loan lenders were informed only of the inflated prices, and thus awarded buyers mortgage loans based on the inflated prices rather than the true, reduced sales prices. The excess mortgage loan proceeds were then used to provide the buyers with the promised kickbacks, which were not disclosed to the mortgage loan lenders. All of this was known to Rick.
Through this scheme, Rick assisted builders and developers, including TJ Waconia, to sell approximately 102 residential properties with mortgage loans totaling approximately $26 million. He also served as property purchaser, directly or through the use of his then-wife’s name, for at least eight properties, and received a total of approximately $397,000 in purchaser kickbacks. To further his scheme, Rick admitted using the U.S. mail and commercial carriers, as well as interstate wire communication, to pass along information to investors. (usattymn52913)
MORAL
That comes to slightly over $132,000 per year for each year in prison, loss of voting rights, inability to obtain certain licenses because of the conviction such as keep or get back his real estate license, and very great difficulty in trying to obtain a decent job when he gets out. In the federal prison system there is no parole and you have to serve 85% of the sentence. Again, to be repetitive, note that the prosecutors are still working on mortgages that occurred in 2005 to 2007 over eight years ago and coming forward.
CALIFORNIA BASKETBALL STAR’S FATHER INDICTED IN LAS VEGAS FOR MORTGAGE FRAUD
FACTS
On May 30, Ronald Holmes RONALD HOLMES, father of former UCLA basketball star Shabazz Muhammad and himself a former hoops standout, has been indicted on federal fraud charges. He has pleaded not guilty to bank fraud, as well as counts for conspiracy to commit mail fraud, wire fraud and bank fraud.
According to the indictment, Holmes and several unnamed associates used fraudulent information and straw buyers to obtain home mortgages and buy and sell houses, keeping the proceeds for themselves. The activities took place between 2006 and 2009 and involved at least three Las Vegas properties. The complaint seeks to recover more than $2.5 million.
Holmes was a standout guard for USC in the early 1980.
In 2000, he was sentenced to six months house arrest for fraud involving multiple mortgages in Los Angeles County that were obtained in the early 1990s using false information.
According to U.S. Atty. Daniel G. Bogden's complaint, Holmes lived in two houses obtained with fraudulent mortgage applications, and seldom made mortgage payments. He also allegedly conspired to have straw buyers file bankruptcy petitions to delay foreclosure of homes he was occupying. The lenders that underwrote the mortgages include Citibank, JP Morgan Chase and Centralbanc Mortgage Corp., the indictment says. (usattnv5-31-13)
MORAL
The “unnamed defendants” had better find legal counsel now.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE. AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE.
